- The trade group’s outlook indicates a more challenging holiday for retailers, especially after two years of exceptional demand.
- A year ago, consumers were shopping earlier and spending more to get gifts as stores struggled to keep shelves stocked due to delivery delays.
- This year, major retailers are swimming in extra inventory as consumers spend less on items like clothing and electronics.
Getting shoppers to spend this holiday season will not be easy.
The National Retail Federation said Thursday it expects November and December holiday sales to rise 6% to 8% year-over-year, a decline adjusted for the impact of inflation. The sales forecast does not include spending on car dealers, gas stations and restaurants.
According to the Bureau of Labor Statistics CPI, inflation rose 8.2% as of September from a year earlier. This is almost a four-decade high. The NRF, for its part, pointed to the Personal Consumption Expenditure Price Index, which rose 5.1% year-over-year, as a more appropriate measure of rising consumer prices.
The forecast comes after the pandemic generated exceptional demand for two years during a key holiday shopping season. Holiday sales rose 8.2% year-over-year to $777.3 billion in 2020, according to NRF, as consumers cheered themselves up with gifts during the pandemic. Last year, holiday sales were up 13.5% year-on-year to $889.3 billion.
The trade group’s forecast points to more challenging holidays for retailers. A year ago, consumers were shopping earlier and spending more to get gifts as stores struggled to keep shelves stocked due to delivery delays. However, this year major retailers, including walmart as well as Nike bathe in additional inventory. And consumers spend less on things like clothing and electronics as they pay more for products and services like restaurants and travel.
NRF CEO Matt Shea told CNBC that Americans still want to spend this holiday season, but became more careful. In some cases, he says, they use savings accounts and use their credit cards to pay for purchases.
Low- and middle-income consumers are under the most pressure from rising food, energy and housing prices, Shay said.
“They are focused on those needs,” he said. “Part of that will affect their gifts and how they cover their other expenses during the holiday season.”
According to Jack Kleinhenz, chief economist at NRF, there are still factors working in favor of retailers. Consumers have built up savings during the pandemic and the labor market is strong, which could make them feel secure enough to keep spending.
Travel takes up a large part of people’s budgets, but he said they are more likely to bring food or gifts when they go on those trips, and may also buy new outfits.
Consumers plan to spend an average of $832.84 on gifts and holiday items such as jewelry and food, according to NRF. This roughly corresponds to the last 10 years, but this amount can buy fewer goods due to inflation.
Hiring is expected to be more modest, with retailers hiring between 450,000 and 600,000 seasonal workers. This is down from 669,800 seasonal hires in 2021.
Other industry observers are also predicting a subdued holiday season. For example, the consulting firm Bain & Co. predicts growth of as much as 7.5% over last year, or just 1-3% adjusted for inflation. AlixPartners is forecasting an increase of 4% to 7%, which is an inflation-adjusted drop.
This year’s projected increase in spending will range from $942.6 billion to $960.4 billion.
This growth is comparable to an average increase of 4.9% over the past 10 years, with the last two years contributing significantly to this growth.
Credit: www.cnbc.com /