NRF: Consumer spending expected to normalize in 2024

Consumer retail spending is estimated at $5.23 trillion in 2024, excluding automobiles and fuel, according to the National Retail Federation (NRF). The trade group expects sales growth between 2.5% and 3.5% over the prior year, below the 3.6% growth in 2023.

“The resiliency of consumers continues to power the American economy, and we are confident there will be moderate but steady growth through the end of the year,” NRF President and CEO Matthew Shay said. “Successful retailers offer consumers products and services when, where and how they want to shop with prices they want to pay.”

Shay said the 2024 forecast is in line with the 10-year pre-pandemic average annual sales growth of 3.6%. He made the comments during a Wednesday (March 20) webcast.

Non-store and online sales, which are included in the total figure, are expected to grow between 7% and 9% year over year to a range of $1.47 trillion to $1.5 trillion. That compares with non-store and online sales of $1.38 trillion in 2023.

Retail sales are closely tied to the financial health of consumer households, said NRF Chief Economist Jack Kleinhenz. He said consumer balance sheets and debt servicing levels remain in good condition. Rising home and stock prices in 2023 likely stimulated greater consumer spending via the so-called wealth effect and this should continue in 2024. He said several surveys reveal that consumers appear to have a favorable outlook which should also support their willingness to spend, but many consumers are feeling a pinch from tighter credit and inflation.

Steve Liesman chief economist at CNBC, said the rate of inflation is moderating but has not necessarily equated to lower prices, particularly in food and services like insurance, health care or travel. He said consumers are trying to rebalance spending to a more even split between goods and services that flipped out of sync during the pandemic and the year following. Liesman said consumer households overall remain resilient and spending on the things they need while displaying more discernment over their wants.

The NRF said 2024 is starting on a more optimistic note than 2023 when many economists had forecast a mild recession by the end of 2023, which did not materialize. Kleinhenz said consumer confidence is up from where it was a year ago, though it remains below pre-pandemic levels. He said the economy is largely supported by consumers who have shown more resilience than expected.

“It’s hard to be bearish on the consumer. The question for 2024 ultimately is, will consumer spending maintain its resilience?” he added.

NRF projects full-year GDP growth of around 2.3%, a slower speed than the 2.5% in 2023 but strong enough to sustain job growth. Inflation is expected to moderate to 2.2% on a year-over-year basis, due to a cooling economy, lower labor costs, and retreating housing costs.

A tight labor market, with its robust job growth and wage gains fueling consumer spending, is expected to cool in 2024. With the pace of the economy slowing in 2024, NRF expects about 100,000 fewer jobs on average per month compared with 2023 and the unemployment rate to average 4% for the full year, Kleinhenz said.

Walmart U.S. CEO John Furner, who also is chairman of the NRF Board, took part in the webinar. He said consumers are being a bit more choiceful with their discretionary purchases, but overall the retail climate is positive. He said new technology will impact every aspect of the retail shopping experience from enhancing online searches to faster order retrieval and delivery to better forecasting demand so that shelves are full with items customers want and need.

Furner admitted that inflation has been stubborn in the food categories which negatively impacts lower income households more than the affluent. He said consumers are demanding convenience and that is not going to change.