Overall story for holiday season 'looks very good,' says NRF economist

Marianne Wilson
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The NRF forecasts that holiday sales will increase 3% to 4% over 2022.

Every retail holiday season since the pandemic has been unique, and that will be the case again this year.

That’s the view of National Retail Federation chief economist Jack Kleinhenz, who noted that the last few holiday shopping seasons have been filled with unmatched peculiarities for consumers and retailers alike, including surging online shopping in 2020 and supply chain bottlenecks in 2021.

“This year, a whole new set of dynamics is in place,” Kleinhenz said. “The average household remains on relatively solid financial footing despite pressures from still-high inflation, stringent credit conditions and elevated interest rates.”

Also, recent revisions to government data indicate that consumers haven’t drawn down as much of their pandemic savings as believed earlier, and savings are still providing a buffer to support spending, he added.

“The overall story for this holiday season is that it looks very good,” said Kleinhenz. 

Although there is lots of uncertainty surrounding the measurement of how well the economy is performing, it continues to move forward and defy recession predictions, proving it to be more resilient than anticipated, according to Kleinhenz.

“I expect the recent rhythm of spending will continue into the holiday season and that consumers will continue to spend on a range of items and experiences but at a slower pace,” he said.

Kleinhenz observed that there has been “a disconnect between solid consumer spending and weak consumer confidence” with shoppers spending more despite worries about inflation, high interest rates and political stress. The consumer sector has been “remarkably resilient” this year, he noted, even though spending has been uneven.

There has been a shift in spending from goods to services that could affect holiday retail sales as consumers who stayed home during the pandemic spend on travel, entertainment and restaurant dining. But Kleinhenz said consumers often prioritize holiday spending and may even reduce purchases earlier in the year to safeguard their ability to spend during November and December celebrations.

NRF’s annual holiday forecast predicts record spending during the holiday season — defined as Nov. 1 through Dec. 31 — and forecast retail sales (excluding auto dealers, gas stations and restaurants) to increase 3% to 4% over 2022 to between $957.3 billion and $966.6 billion, topping the record of $929.5 billion of last year. The growth rate is consistent with the average annual increase of 3.6% from 2010 to 2019, according to NRF.

Kleinhenz’s comments came in the November issue of NRF’s Monthly Economic Review, which provided additional detail on the reasoning behind NRF’s holiday sales forecast.