How Holiday 2023 Will Differ from Yuletides Past

Retail sales will have ‘a whole new set of dynamics,’ says NRF

By YSN Staff

Every holiday selling season since the pandemic has been unique, and that will be the case again this year, the National Retail Federation (NRF) predicts.

According to Jack Kleinhenz, chief economist for the retail trade association, “The last few holiday shopping seasons have been filled with unmatched peculiarities for consumers and retailers alike.” Specifically, in 2020 sales surged 9.1% year over year despite the challenges of COVID-19, and there was a significant move to shopping online as shoppers stayed home. 

In 2021, sharply rising demand overcame supply chain bottlenecks for a record growth rate of 12.7%, he continued. And holiday sales in 2022 rose 5.4% as savings built up during the pandemic provided a buffer against rising inflation, and more consumers returned to stores.

“This year, a whole new set of dynamics is in place,” Kleinhenz said. “The average household remains on relatively solid financial footing despite pressures from still-high inflation, stringent credit conditions and elevated interest rates.” What’s more, consumers haven’t drawn down as much of their pandemic savings as was earlier thought, he noted, and savings are still providing a buffer to support spending. As a result, he said, “The overall story for this holiday season is that it looks very good.”

Kleinhenz’s comments follow the  release this week of the NRF’s annual holiday survey and sales forecast, which projects a year-over-year increase in retail revenue of 3%-4% from Nov. 1 through Dec. 31 to upwards of $967 billion, topping last year’s record $929.5 billion in seasonal sell-through.

“While there is significant uncertainty surrounding the measurement of how well the economy is performing, it continues to move forward and defy recession predictions, proving it to be more resilient than anticipated,” the economist said. “I expect the recent rhythm of spending will continue into the holiday season and that consumers will continue to spend on a range of items and experiences but at a slower pace. Households are starting the season in decent financial shape and are managing the constraints of their paychecks amid higher interest rates and higher monthly financial obligations as they seek to maintain their mode of living.”

Kleinhenz added that there has been “a disconnect between solid consumer spending and weak consumer confidence,” with shoppers spending more despite worries about inflation, high interest rates and political stress. Thanks to continued wage and job growth, the consumer sector has been “remarkably resilient” this year, even though spending has been uneven, with growth rates rising at a “brisk pace” in the first quarter only to slow in the second and become “quite strong” in the third with another slowdown expected in the fourth.

Holiday retail sales could also be affected by a shift in spending from goods to services, as consumers who stayed home during the pandemic are venturing out again for travel, entertainment and restaurant dining. But Kleinhenz said consumers often prioritize holiday spending and may even reduce purchases earlier in the year to safeguard their ability to spend during the festive November-December cycle.

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