NRF: Holiday spending on track for steady growth; economy on ‘solid footing’
Retailers can expect steady sales growth for the upcoming holiday season despite some mixed economic signals in October.
That’s according to the National Retail Federation, whose chief economist Jack Kleinhenz said that, while there were contradictions and mixed signals in the October “economic data calendar,” the U.S. economy remains “in a good place.”
Kleinhenz, who made his remarks in the November issue of NRF’s Monthly Economic Review, said it is too soon to predict the impact of this week’s election results on the economy for the remainder of the year or their effect going forward. But with household balance sheets bolstered by a strong stock market and rising home values along with income, the outlook remains positive overall.
“I am optimistic about the pace of economic activity in the final quarter of the year,” Kleinhenz said. “Given third-quarter spending performance and comprehensive upward revisions in late September for income, spending and the savings rate, I have increased confidence in the economy’s strength and the near-term outlook.”
Most importantly, Kleinhenz said, the new data doesn’t change NRF’s 2024 holiday forecast or retail sales projections for the year. In October, NRF forecast that sales during the November-December holiday season would increase between 2.5% and 3.5% over 2023 to a total of between $979.5 billion and $989 billion.
“Putting all these considerations together, this holiday season looks very good,” Kleinhenz said. “Households are starting the season in decent financial shape and are managing the constraints of their paychecks, with growth in wages and salaries still supportive of a steady pace of spending. The economy remains on solid footing and is growing faster than many expected.”
Two weeks after NRF released its forecast, government data showed the economy had gained only 12,000 jobs during October and that the annual pace of gross domestic product growth had slowed to 2.8% in the third quarter from 3% in the second quarter. But Kleinhenz said that the drop in job numbers was caused by the temporary impact of Hurricanes Helene and Milton along with major labor union strikes, and that employment had still gained 104,000 jobs on a three-month average.
GDP growth was still “surprisingly strong,” continuing a 10-quarter string of “solid” increases despite inflation and high interest rates as consumer spending “continued to contribute a lot of horsepower,” he added.
Salaries and wages as measured by the Employment Cost Index were up 3.9% year-over-year as of September, the slowest growth since late 2021 but well above inflation, Kleinhenz said. The Personal Consumption Expenditures Price Index – the Federal Reserve’s preferred inflation gauge – fell to a year-over-year increase of 2.1% in September, a tick above the Fed’s 2% target and the lowest since February 2021. At this point, inflation is being driven almost entirely by services rather than goods.
“Putting all these considerations together, this holiday season looks very good,” Kleinhenz said. “Households are starting the season in decent financial shape and are managing the constraints of their paychecks, with growth in wages and salaries still supportive of a steady pace of spending. The economy remains on solid footing and is growing faster than many expected.”
