The National Retail Federation (NRF) recently predicted that Americans will spend less on holiday gifts this year, reflecting the changing landscape of the postpandemic consumer economy. The NRF forecasts a growth of 3% to 4% in holiday sales compared to last year, resulting in a spending range of $957.3 billion to $966.6 billion. While this projection falls below the impressive gains of 5.4% in 2022 and 13.5% in 2021, it still represents record-breaking levels of expenditure, as highlighted by the trade group.
According to NRF CEO Matthew Shay, consumers are becoming more cautious due to inflation, rising interest rates, and the impact of monetary policy decisions. This heightened awareness prompts individuals to exercise restraint when it comes to their purchasing behaviors.
It is important to note that the NRF’s forecast only covers sales made between November 1 and December 31, excluding any earlier transactions. Retailers may ultimately experience higher figures when factoring in the purchases made during their October sales events.
The NRF acknowledges that this slowdown in spending is both predictable and inevitable, as the economy seeks to rebalance itself following the irregularities brought about by the pandemic. Importantly, this year’s forecast aligns relatively well with pre-pandemic trends. From 2010 to 2019, holiday sales saw an average annual increase of 3.6% (excluding car, gas, and restaurant sales), as calculated by the NRF.
As the holiday season approaches, it will be crucial for retailers to adapt their strategies accordingly, taking into account evolving consumer patterns and preferences. While expectations signal a moderation in spending this year, continued analysis and agile decision-making will be key to navigating the complex consumer landscape during these uncertain times.
The NRF’s Holiday Shopping Season Estimates
Subtitle: Adjusted for Inflation and New Dynamics
To be sure, the NRF’s estimates aren’t adjusted for inflation, which was lower before the pandemic than it is today. However, the latest consumer price index report reveals prices rising at a notable 3.7% on an annual pace. Jack Kleinhenz, chief economist at the NRF, acknowledges that retail pricing increases have been “sizably lower” compared to the overall CPI.
“The last few years’ holiday shopping season has been filled with unmatched peculiarities for consumers and retailers alike,” notes Kleinhenz. Supply chain complications, soaring inflation, and an exceptionally tight labor market have all contributed to the turbulence.
New Dynamics Shaping the Season
While the labor market remains strong and prevents consumers from facing a spending cliff, this year brings several new factors that contribute to a more moderate holiday season. Kleinhenz highlights higher interest rates, the resumption of student loan payments, lower savings, and rising credit card balances as key contributors.
A Shift in Spending Patterns
Moreover, with the final pandemic-era restrictions phased out, consumers are diverting their spending toward services such as travel and dining out, rather than durable goods—an observation shared by Kleinhenz.
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