NRF’s 3-4% Holiday Growth Forecast Doesn’t Tell the Whole Story
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U.S. consumers will find ways to pinch pennies when holiday shopping this season.
The National Retail Federation (NRF) forecasts 3 percent to 4 percent retail sales growth for the November-December holiday shopping period. That would bring sales to $957.3 billion to $966.6 billion, versus $930 billion in 2022. The online component of the seasonal total is seen rising 7 percent to 9 percent for $273.7 billion to $278.8 billion altogether. That’s up from $255.8 billion last year.
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According to NRF president and CEO Matthew Shay, retail sales have now “grown year-over-year for 41 consecutive months,” or every month since May 2020. For the first nine months of 2023, retail sales were up 3.7 percent when compared with the same 2022 period, he said.
However, after factoring in inflation ranging from 3.5 percent to 3.8 percent, holiday sales this year could end up flat or slightly negative.
“In spite of uncertainty in the economy and challenges households are facing, we’ve seen strength and resilience across the consumer sector,” Shay said.
He added that while consumers are becoming more cautious in the face of inflation and rising interest rates, they continue to spend on household priorities. That spending has been “supported by wage growth and the resilience and strength of the job market and historically low unemployment rate. And we think that’s going to continue to support consumer activity throughout the holiday season,” Shay said.
A recent NRF survey on spending indicated that consumers are looking for deals and discounts to get more out of their paychecks. Many have started shopping well ahead of the usual season, some as early as the summer, thanks in part to Amazon Prime Day. That study found that gift cards are the most popular spending focus this year, followed by apparel and accessories.
Shay said retailers are prepared with attractive deals and sufficient staffing. With the peak import month in August, he doesn’t expect geopolitical issues to affect holiday merchandise deliveries.
“This holiday season we expect retailers will hire between 350,000 and 450,000 seasonal workers. And that’s in line with last year’s seasonal hires of 390,000 which would be about right in the middle of this year’s expectation,” he said.
NRF chief economist Jack Kleinhenz said slowing job growth could impact consumer spending. “I think the consumer will be still engaged, but we also [could see] some softening,” he said, adding that new data on the unemployment rate for retail workers is “still pretty, pretty low, relatively speaking [at] 4 and 4.9 percent.”
While Kleinhenz said that NRF doesn’t expect the economy to tip into a recession this year, consumers are worried about what lies ahead.
The Conference Board’s Consumer Confidence Index—which fell for the third consecutive month—slipped in October to 102.6, down from an upwardly revised 104.3 in September. Both indices—Present Situation Index and Expectations Index—also posted declines, with the latter at 75.6 and below the 80 level that historically signals a recession within the next year.
The Conference Board’s chief economist Dana Peterson said the decline in consumer confidence was “evident across housholders aged 35 and up, and not limited to any one income group.” The decline in expectations reflects concern about future business conditions, job availability and incomes, she added. In addition, the average 12-month inflation expectations rose in October to 5.9 percent, after holding steady at 5.7 percent for the past three months.
In addition to consumer worries, retailers are concerned too and are likely to pull out all the stops if sales don’t materialize early in the season. Ross Stores group president and chief operating officer Michael Hartshorn is prepared for a very promotional holiday season.
Placer.ai said that while superstores drew more Black Friday visits in 2022 than the year before, a study shows that visits spikes on Dec. 23. That could be a key day again this year as inflation-weary consumers hold out until the last possible minute for holiday bargains.
The Placer.ai study also indicated that low-cost retailers such as discount chain Five Below could win the season with rock-bottom prices.
