NRF: Holiday spend to reach record levels even as growth slows to pre-COVID levels

Holiday shoppers will spend more this year amid solid wage and job growth but will be looking for deals and discounts to stretch their budgets.

That’s according to the National Retail Federation’s annual holiday forecast which said that spending will grow between 3% and 4% this year over 2022 to between $957.3 billion and $966.6 billion. (NRF, whose forecast excludes automobile dealers, gasoline stations and restaurants, defines the holiday season as November 1 through December 31.)

The expected gain is consistent with the average annual holiday increase of 3.6% from 2010 to 2019, noted NRF. The  slower growth rate compares with the past three years, when trillions of dollars of stimulus led to unprecedented rates of retail spending during the pandemic. Holiday sales rose 9.3% in 2020, 13.5% in 2021 and 5.3% in 2022.

Online and other non-store sales, which are included in the total, are expected to increase between 7% and 9% to between $273.7 billion and $278.8 billion. That’s up from $255.8 billion last year.

“Consumers remain in the driver’s seat, and are resilient despite headwinds of inflation, higher gas prices, stringent credit conditions and elevated interest rates,” NRF chief economist Jack Kleinhenz said. “We expect spending to continue through the end of the year on a range of items and experiences, but at a slower pace. Solid job and wage growth will be contributing factors this holiday season, and consumers will be looking for deals and discounts to stretch their dollars.”

“For all that the consumer has kept the economy afloat, the composition of spending from goods to services will also define holiday sales trends,” Kleinhenz added. “Service spending growth is strong and is growing faster than goods spending. The amount of spending on services is back in line with pre-pandemic trends.”

Despite months of preparation for the holiday season, retailers could sustain unpredictable impacts from weather. This year, holiday retail spending may experience residual effects from El Niño, depending on the strength and persistence of the weather phenomena.

NRF's holiday forecast is based on economic modeling that considers a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit and previous retail sales. NRF’s calculation excludes automobile dealers, gasoline stations and restaurants to focus on core retail. NRF defines the holiday season as Nov. 1 through Dec. 31.

NRF’s latest holiday survey conducted by Prosper Insights & Analytics, which is separate from the holiday sales forecast, found consumers plan to spend $875 on core holiday items including gifts, decorations, food and other holiday-related purchases this year.

In other findings, nearly two out of three respondents said sales and promotions are even more important to them this holiday season than last year. And nearly 40% said they are cutting back in other areas to cover the cost of holiday items. 

NRF's holiday forecast is based on economic modeling that considers a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit and previous retail sales. NRF’s calculation excludes automobile dealers, gasoline stations and restaurants to focus on core retail. NRF defines the holiday season as Nov. 1 through Dec. 31.