Despite the recent effects of hurricanes, the overall economy remains strong, with consumer spending driving growth in the 2024 winter holiday season, according to the National Retail Federation’s (NRF) retail sales forecast released Oct. 15.
Based in Washington, DC, NRF advocates for the people, brands, policies and ideas that help retail succeed. Retail is the nation’s largest private sector employer, contributing $5.3 trillion to annual GDP and supporting more than one in four jobs in the United States.
The report highlights a 3.4% year-over-year increase in retail sales, with holiday sales rising between 2.5% and 3.5%, for a total of between $980 billion and $990 billion. A shorter pre-Christmas shopping period and continued inflation are challenges, but timely growth in marketing and e-commerce are mitigating factors.
Employment remains healthy, wages are rising and consumer credit is showing stability. This forecast is in line with pre-pandemic sales growth rates.
“The 2024 holiday season offers retailers more ‘normalcy’ with cooling inflation. Still, there’s no doubt that consumers continue to look for value,” Matt Pavich, senior director of strategy and innovation at price optimization solutions provider Revionics, told the E-Commerce Times.
Holiday spending steady despite shorter shopping season
Sales promotions will generally play a bigger role this shopping season. Retailers will face declining customer loyalty, increasing cross-channel competitors and a more dynamic environment where prices change more often to capture consumers looking for great deals, Pavich said.
Consumer spending, which accounts for 70% of economic activity, remained steady despite persistent inflation, especially in services, he added. Wage growth generally outpaced inflation, with goods inflation stagnating to negative and food inflation rising slightly.
“Retail sales have shown consistent growth for 52 consecutive months, with a 3.4% increase in the first eight months of the year compared to the same period in 2023,” he said.
Pavich noted that the holiday shopping period between Thanksgiving and Christmas will be six days shorter, affecting logistics and consumer expectations. To compensate for the shorter time, retailers started marketing and promotional campaigns earlier.
A shorter period can put pressure on the supply chain and fulfillment, affecting consumer expectations of convenience. Non-store sales, including e-commerce, are expected to add value to shipping during the holiday season, he noted.
Holiday 2024 sales are poised for steady growth
The NRF predicts holiday sales growth of 2.5% to 3.5% over last year’s holiday season. The forecast includes e-commerce, which is expected to grow between 8% and 9%, totaling $295 billion to $300 billion.
A related bright spot is seasonal hiring this shopping season. The NRF expects 400,000 to 500,000 workers, reflecting a fully staffed retail industry.
The forecast methodology takes into account 20 economic data points, including GDP, employment, income, inflation and interest rates.
“To reiterate, we forecast holiday retail sales to be up two and a half to three and a half percent over last year’s holiday season,” emphasized Bill Thorne, senior vice president of communications and public affairs at NRF.
That represents about $980 billion in sales, compared to $955 billion in total holiday spending in 2023. The sales growth is in line with a pre-pandemic annual average holiday increase of 3.6% from 2010 to 2019, he added.
“From what I’ve heard, consumers have continued capacity to spend and this year will be a record level of spending,” he said.
NRF: Economic Strength, Consumption Resilience Spark Spending
According to NRF Chief Economist Jack Kleinhenz, 3% gross domestic product (GDP) growth in the second quarter and lower relative energy costs helped consumer spending remain resilient. Household balance sheets are also in good shape. That credit goes to increased savings and net worth, which rose 7.1% in the second quarter.
Although consumers are still feeling the economic pinch, inflation has cooperated. The personal consumption expenditures (PCE) price index deflator fell to 2.2% and retail prices are slightly lower than a year ago.
“However, we still believe that even with inflation persisting to some extent, spending should be in a positive mode,” he predicted.
Kleinhenz reported that employment and the labor force remain healthy, with an average monthly gain of 186,000 workers over the past three months and an unemployment rate of 4.1%. However, weekly jobless claims were affected by hurricanes and the Boeing strike, but overall employment figures remain positive.
Data from the US Bureau of Labor Statistics (BLS) Job Opening and Labor Turnover Survey (JOLTS) shows impressive job openings and hiring, indicating a strong labor market. Wage growth was consistent, with wages up 4.1%, Kleinhenz said.
Experian Data also suggests better holiday sales
Experian’s latest credit and business data report on holiday spending trends and statistics reveals key changes in shopping behavior. Researchers surveyed 1,000 consumers to compare holiday spending habits with data from the previous year.
The results identified the following trends:
- Greater use of “Buy Now, Pay Later” options, reflecting a cautious approach to spending amid economic uncertainty.
- Shopping is dominated by online shopping, which accounts for about one-third of all holiday spending, especially among shoppers aged 30 to 39.
- CTV is the channel with the best engagement, reaching more than two-thirds of the US population, and is expected to be the most effective channel for reaching consumers during the holiday season.
“The American consumer has been more resilient than anyone expected. But that’s not a free pass for retailers to underinvest in their stores,” Nikki Baird, vice president of strategy and product at retail technology company Aptos, told the E-Commerce Times.
Investing in labour, customer experience technology and digital transformation of stores was all too easy to kick the can until you suddenly realize there is no way out, she argued.