In spite of concerns about the future state of the economy, Americans say they intend to spend more on this year’s holiday season than they did last year, according to recent surveys.
Holiday spending is expected to be healthy even with recent inflationary challenges, says the National Retail Federation.
Its forecast predicts holiday retail sales during November and December will grow between 6% and 8% over 2021 to between $942.6 billion and $960.4 billion.
Last year’s holiday sales grew 13.5% over 2020 and totaled $889.3 billion, shattering previous records, the federation reported.
Holiday retail sales have averaged an increase of 4.9% over the past 10 years, with pandemic spending in recent years accounting for considerable gains, NRF points out.
“While consumers are feeling the pressure of inflation and higher prices, and while there is continued stratification with consumer spending and behavior among households at different income levels, consumers remain resilient and continue to engage in commerce,” explains NRF President Matthew Shay.
“In the face of these challenges, many households will supplement spending with savings and credit to provide a cushion and result in a positive holiday season,” he adds.
NRF expects that online and other non-store sales, which are included in the total, will increase between 10% and 12% to total between $262.8 billion and $267.6 billion.
This figure is up from $238.9 billion last year, which saw extraordinary growth in digital channels at a time when consumers turned to online shopping to meet their holiday needs during the pandemic.
While ecommerce will remain important, households are also expected to shift back to in-store shopping and a more traditional holiday shopping experience.
“This holiday season cycle is anything but typical,” NRF Chief Economist Jack Kleinhenz believes. “NRF’s holiday forecast takes a number of factors into consideration, but the overall outlook is generally positive as consumer fundamentals continue to support economic activity.”
Despite record levels of inflation, rising interest rates and low levels of confidence, consumers have been steadfast in their spending and remain in the driver’s seat, Kleinhenz claims.
“The holiday shopping season kicked off earlier this year – a growing trend in recent years – as shoppers are concerned about inflation and availability of products,” he says.
“Retailers are responding to that demand, as we saw several major scheduled buying events in October. While this may result in some sales being pulled forward, we expect to see continued deals and promotions throughout the remaining months.”
Kleinhenz’ comments mirror NRF’s reported data about retail sales, which shows that consumers have been kicking off their holiday shopping early over the last decade in order to spread out their budgets and avoid the stress of holiday shopping.
This year, given concerns around inflation, 46% of holiday shoppers said they planned to browse or buy before November, according to NRF’s annual survey conducted by Prosper Insights & Analytics. Still, consumers plan to spend $832.84 on average on gifts and holiday items such as decorations and food, in line with the average for the last 10 years.
NRF expects retailers will hire between 450,000 and 600,000 seasonal workers. That compares with 669,800 seasonal hires in 2021. Some of this hiring may have been pulled into October as many retailers are eager to supplement their workforces to meet increased consumer demand.
Retailers face a multitude of challenges, but at least one is totally out of their hands. Weather, as always, plays a role in holiday retail sales. The National Oceanic and Atmospheric Administration is forecasting warmer-than-average temperatures for the Southwest, Gulf Coast and Eastern Seaboard, which cover a large swath of the U.S. population, but wetter and snowier conditions are expected for parts of the northern tier.
NRF’s holiday forecast also is in line with the organization’s full year forecast for retail sales, which predicted retail sales will grow between 6% and 8% to more than $4.86 trillion in 2022.
NRF’s holiday forecast is based on economic modeling that considers a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit, previous retail sales and weather.
NRF’s calculation excludes automobile dealers, gasoline stations and restaurants to focus on core retail. In addition, NRF defines the holiday season as stretching between Nov. 1 and Dec. 31.
The methodology used to calculate holiday retail employment in 2020 was changed to accommodate the sizeable impact of the Covid 19 virus on overall industry employment, the federation explains. However, in 2021, NRF returned to a traditional employment buildup method.
Gallup in Agreement
The Gallup organization says U.S. adults polled in October planned to spend an average $932 on gifts this season. This is sharply higher than Americans’ average $837 holiday spending prediction last October and their $805 forecast in October 2020.
The Gallup estimate nearly matches the $942 measured in October 2019 – which was the high point in its survey results since 2006.
“For now, Americans’ 2022 spending intentions suggest retailers will enjoy a better-than-average holiday season, although not rising to the level of the extraordinary one they had last year,” states Lydia Saad, director of U.S. social research at the Gallup organization
One reason Americans’ holiday spending estimate is especially high this year could be that consumers are expecting to pay more for goods like clothing, electronics and toys after experiencing a year of high inflation, she believes.
“Still, the fact that spending intentions are significantly higher now than a year ago at this time is a promising sign for retailers as the holiday season gets underway.”
The average amount Americans anticipate spending encompasses a range of shopping budgets. More than a third of U.S. adults, 37%, plan to spend $1,000 or more. Thirty percent plan to spend between $250 and $999, while 17% plan to spend less than $250, Gallup reports
Consumers’ holiday spending also can be influenced by changes in the economy, gas prices or even major news. Consumers remain fairly cautious in characterizing their spending compared to last year. Just 17% say they will spend more on gifts than they spent last year, while 26% say they will spend less and 55% say they will spend the same amount.
This year’s higher overall spending estimate is mainly the result of more Americans saying they will spend $1,000 or more, which is up from 33% last year, as well as fewer saying they will not spend anything, according to Gallup.