The largest trade group in the United States said on Tuesday that it expects consumers to spend more during the upcoming holiday shopping season but that sales growth will be slower than last year due to concerns about persistent inflation and prices.
The National Retail Federation said its 2024 forecast shows shoppers will make purchases worth $979.5 billion to $989 billion in November and December, representing a 2.5%-3.5% increase over the same two-month period a year ago.
However, the $955.6 billion spent during the 2023 holiday shopping season was 3.9% more than in 2022.
This year’s predicted pace is consistent with an average increase of 3.6% from 2010 to 2019. Amidst the coronavirus pandemic, Americans are increasing their spending. Holiday season sales rose 9% in 2020 from the previous year, and are up 12.4% in 2021, according to the National Retail Federation.
The trade group makes its calculations based on government statistics. The numbers do not include sales at car dealerships, gas stations and restaurants.
The forecast takes into account economic indicators such as employment, wages, consumer confidence, disposable income, consumer credit, past retail sales and the weather.
“Interest rates are slightly higher than in recent memory,” National Retail Federation CEO and President Matt Shay said during a press conference. “Consumers have those interest rates and inflation on their minds. We therefore expect that consumers will continue to be more price conscious and make more informed spending decisions. “
The trade association released the outlook as data showed US consumers continued to spend, supported by strong employment, low unemployment and healthy household finances. In addition, gasoline prices are falling, leaving little extra money for consumers to spend on gifts. The national average price for a gallon of unleaded gasoline was $3.2 on Tuesday; last year, it was $3.60, according to auto club AAA.
But there are many challenges this season, including a presidential election that could cause significant disruption to shopping in November. NRF officials said it is almost impossible to gauge the impact of the election on current or future spending.
Since Thanksgiving will be on November 28, there will be a few fewer days between the holiday and Christmas Day compared to last year. Other factors that could hurt holiday sales: the economic impact of hurricanes Helene and Milton, NRF officials said.
Walmart, the nation’s largest retailer, plans to advertise savings on Thanksgiving food products starting Oct. 14, about two weeks earlier than last year.
The NRF forecast was in line with the forecasts of other analysts, which also indicated a cautious attitude among consumers.
Management consulting firm Bain & Co. said it expects retail sales in November and December to increase by 3% compared to the 4.2% growth seen last year. AlixPartners, another consulting firm, expects October to December sales to rise anywhere from 2% to 5%, down from last year’s 6% increase. Research consulting firm Customer Growth Partners predicted sales would increase 4% during the holiday season, just slightly below last year’s figure.
Meanwhile, Adobe Analytics predicts that online sales will increase by 8.9%, marking the fastest pace of spending since 2021 when it was 8.6%. Last year, online sales were up 4.9%, compared to the previous year. Vivek Pandya, lead analyst, Adobe Digital Insights, noted that consumer interest in discounts will drive spending. Discounts should be 30%, like last year, he said.
Although the rate of inflation is slowing down, it is still a major pocket problem for consumers as many foods are still more expensive than they were a few years ago.
James Zahn, editor-in-chief of the industry’s trade publication, Toy Book, thinks consumers are more price conscious than last year when it comes to buying toys. Toys under $20 are more suitable for parents, he said.
Kohl’s executives said last week that consumers, especially those with low incomes, will feel more pressured than last year.
Christie Raymond, chief marketing officer at Kohl’s, said that the increase in prices on food and other essentials is a food for saving people. As part of the holiday strategy, Kohl’s plans to be aggressive in offering discounts. Regarding the presidential race, Kohl’s managers said they are not sure if consumers will hold back their purchases before the November 5 election, but it is something they are looking at.
“We’re just trying to follow the consumer, and we know they’re going to feel a bit stressed when it comes to Thanksgiving,” Raymond told reporters.
-Anne D’Innocenzio, Associated Press business writer
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