According to the National Retail Federation’s (NRF) forecast of retail sales for 2024, despite recent hurricane impacts on the economy, it remains generally strong. Consumer spending will drive growth during the winter holiday season.
NRF, based in Washington D.C., advocates for the brands, people, policies and ideas that make retail successful. Retail is the largest private-sector job creator in the United States, with a contribution of US$5.3 trillion per year to GDP. More than one fourth of the jobs are supported by retail.
The report shows that retail sales grew by 3.4% over the past year, while holiday sales were forecast to grow by 2.5% to 3.5%. This would total between $980 and $990 Billion. The shorter holiday season and the ongoing inflation are challenges. However, early marketing and growth in e-commerce can mitigate these.
The employment situation remains stable, and wages are increasing. Consumer credit is also stable. This forecast is in line with the pre-pandemic holiday growth rates.
“The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Matt Pavich senior director, strategy and innovations at pricing optimization solution provider Revionics“, said, according to the E-Commerce Times.
Holiday Spending is Stable Despite Shorter Shopping season
Sale promotions in general will play a greater role during this holiday shopping season. Pavich says that retailers are facing a shrinking number of loyal customers, more competitors and a more dynamic marketplace where prices will change more frequently in order to attract consumers who want great deals.
He added that despite persistent inflation, consumer spending, which accounts for 70% of the economy, has been stable, especially in services. He added that wage growth has outpaced inflation. Goods inflation is flat or negative, and food inflation is moderately higher.
“Retail sales are up for the 52nd consecutive month, with an increase of 3.4% in the first 8 months of this year when compared to 2023’s same period,” he said.
Pavich stated that the holiday shopping season between Thanksgiving and Christmas is six days shorter. This will impact logistics and consumer expectations. Retailers began marketing and promotional campaigns earlier to compensate for the shorter holiday shopping period.
This shorter period could put pressure on the supply chain, and affect consumer expectations. He noted that non-store sales including ecommerce are expected to increase shipping costs during the holiday period.
2024 Holiday Sales are Expected to Continue Growing
The NRF predicts that holiday sales will grow between 2.5% to 3.5% over last year’s season. The forecast includes the e-commerce sector, which is predicted to grow by 8% to 10%, totaling between $295 billion and $300 billion.
This shopping season, seasonal hiring is another bright spot. NRF anticipates between 400,000-500,000 workers, indicating a fully-staffed retail industry.
The forecasting methodology takes into account 20 economic data points including GDP, employment and income, inflation rates, and interest rate.
Bill Thorne’s, NRF senior vice-president for communications and public relations, said, “To reiterate, our forecast is that holiday retail will increase by two and a quarter to three and one half percent compared to last year.”
This equates to about $980 billion of sales, compared with $955 billion of holiday spending in 2023. He added that the sales growth was consistent with pre-pandemic holiday average annual increases of 3.6% between 2010 and 2019.
He said: “From what I’ve heard, consumers continue to have the capacity to spend. This year, spending will reach a new record.”
NRF: Economic strength and consumer resilience spark spending
According to the NRF’s chief economist, Jack Kleinhenz, a 3% growth in the Gross Domestic Product (GDP) in the second quarter and a lower relative cost of energy helped consumer spending remain resilient. The household balance sheets are also in good condition. Credit for this goes to an increase in savings and net worth, up 7.1% over the second quarter.
Although inflation is still a concern, consumers have seen a slight improvement. The Personal Consumption Expenditures Prices Index (PCE deflator) is now at 2.2% and retail prices are lower than a month ago.
He predicted that spending would be positive despite the persistent inflation.
Kleinhenz reported that labor and employment remain strong, with 186,000 average monthly gains in the last 3 months. The unemployment rate is 4.1%. Hurricanes and the Boeing strike have affected weekly unemployment claims, but overall employment statistics remain positive.
According to the U.S. Bureau of Labor Statistics’ (BLS) JOLTS data, there are a lot of job openings and hirings. This indicates a strong labor market. Kleinhenz stated that wages have been increasing consistently, by 4.1%.
Experian data also suggests better holiday sales
Experian, a credit and business data company, released its latest Holiday Spending trends and Insights Report to reveal key shifts in consumer shopping behavior. Researchers surveyed 1,000 people to compare their holiday spending habits with data from last year.
The following trends were identified:
- The increased use of the “Buy Now and Pay Later” option reflects a cautious approach towards spending in an uncertain economic climate.
- Spending on online shopping is a major part of holiday shopping, particularly among those aged 30 to 39.
- CTV has the highest engagement, reaching two-thirds or more of the U.S. populace. It is also expected to reach the largest number of consumers during the holidays.
“The American consumer is more resilient than anyone would have thought.” Nikki Baird is vice president of retail technology’s strategy and product. Aptos“, said, according to the E-Commerce Times.
Investments in labor, customer experience tech, and digital transformation of stores have been too easy to kick the can down the road until you suddenly realize no road is left, she asserted.