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CGP Study: Holiday growth to slow amid rising energy prices, supply chain woes

Growing headwinds threaten to take a big bite out of holiday sales growth this year.

Holiday sales for the November-December shopping season will increase 6.7% to a record $813 billion, from $762 billion in 2020, according to Customer Growth Partner’s 20th annual Holiday Forecast. The 6.7% increase is down from holiday 2020’s 7.7% pace—and is less than half the 14% year-over-year growth rate of 2021 year to date through September. (CGP’s holiday forecast spans all retail sales except autos, gasoline and restaurants.)

“After stratospheric growth for almost a year, consumer spending is beginning to settle down to ‘near-normal’ rates,” said CGP president Craig Johnson. “However, the deceleration from the heady double-digit growth of 2021 year-to-date is due to raging energy price hikes, widespread inflation and the supply chain challenges—all mitigating but not fully offsetting otherwise healthy consumer fundamentals.” 

The slower growth pace shows the sharp effects of inflation in general, and energy prices in particular, Johnson said, which are estimated to take some $46 billion out of discretionary spending for the holiday period, with gasoline alone expected to subsume some $35 billion.

“Supply chain challenges will reduce holiday spending by at least $10 billion, with some demand pulled forward into October or delayed into January,” he added.

The CPG forecast for 6.7% holiday growth is below some other industry forecasts. The ICSC, for example, is calling for an 8.9% year-over-year increase in November-December sales with the total expected to reach $923 billion.

Highlights from CGP’s annual holiday report are below.

  •  For the first time this century, apparel and accessories sales will outpace other merchandise sectors, with stellar 18% growth from 2020’s sluggish sales.
  • Department stores will see their best holiday growth rate in decades, up 13% year-over-year — but will still far lag their total sales from the 1990s, when the sector’s shrinkage accelerated.
  • Consumer electronics and appliances will rise some 10% from last year paced by Apple’s new iPhone 13, updated iPad models, and new notebook computers from all major brands.
  • Sporting goods, toy & hobby stores will also thrive, up 9% year-over-year, as once hunkered-down households return to normal recreation patterns and hobbyists shop Michael’s and others.
  • Despite the energy cost, COVID and supply chain challenges, these factors will be mitigated by rising disposable income (up 4.5%), healthy household balance sheets, an extra $500 billion in consumer savings from 2020, and a rising cash “underground” economy — from weed to lawn care — spending money but not showing up in statistics.

“The past 18 months have provided a unique window into the resilience of the American consumer, the resourcefulness of American retailers—and the underlying strength of the economy at large,” Johnson said. “Retail growth is slowing as we lap 2020’s fourth quarter, but we will still see record holiday spending.  If the worst of the inflation fires ease in the New Year, and the supply chain rebalances by mid-year, we may well see a return to solid but sustainable mid-single-digit growth for 2022.”

CGP is a consulting and research firm serving the retail industry. The company maintains a two-decade-long Big Data retail platform tracking retail spending and supporting Annual, Holiday and Back-to-School forecasts, with nationwide field research across more than 100 benchmark shopping venues.

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