NRF: Holiday sales forecast at 2.5% to 3.5% growth from year ago

The National Retail Federation (NRF) predicts more normal growth for 2024 holiday sales. The growth forecast ranges between 2.5% to 3.5% from the prior year with total holiday sales between $979.5 billion and $989 billion, above the $955 billion in 2023.

“Americans prioritize around holidays and will spend as the economy remains fundamentally healthy heading into the final months of the year,” NRF President and CEO Matthew Shay said in the forecast report.

He said spending is supported by strength in the job market and slowing inflation relative to wage growth. One area that could impact the season is a 6-day shorter window between Black Friday and Christmas Eve than in 2023. The NRF prediction covers core retail sales from Nov. 1 to Dec. 31 and excludes restaurants, gas stations and automobiles. Shay said other forecasts may differ because of the date range and scope of surveys.

“While retail sales have begun to be pulled forward in recent years, our data historically begins on Nov. 1 and we will continue to report the data that way for accurate comparisons,” Shay said.

Shay said while some holiday spending has pulled forward to October in recent years, many consumers tend to wait until later to finish shopping. He warned that the shorter period will impact shipping and fulfillment of online orders which are expected to increase between 8% and 9% this year. NRF forecasts online sales to total between $295 billion to $298 billion, up from $273 billion last year.

DISCOUNTS, HIRING
He also expects retailers to be more promotional this year as consumers will be bargain shopping, a habit they adopted amid higher inflation in recent years. Shay said retailers will look for ways to personalize discounts through loyalty programs and other perks, instead of just dropping prices.

Shay said retailers intend to hire around 500,000 seasonal workers this year, the same as in 2023 with many of the positions added in the supply chain around growing omnichannel retail.

The holiday forecast harkens back to pre-pandemic levels of growth, Shay said. He said consumers continue to spend, but overall growth levels are off of highs set during the pandemic when stimulus spending was focused on goods because the service industry was shut down.

NRF reports overall holiday sales in November and December have averaged about 19% of the total annual holiday sales over the past five years. That said, the holiday season is typically more profitable given increased volume while fixed costs remain the same.

LOWER INFLATION
Holiday sales forecasts are not adjusted for inflation, which averaged 2.4% in September according to the Consumer Price Index, without food and energy prices rising 3.3%. Shay said goods inflation rate increases have declined in many categories, which is helpful to consumers.

NRF Chief Economist Jack Kleinhenz said one metric now helping consumers is lower energy prices which can add extra spending power on other things, instead of fuel for automobiles. NRF does not factor inflation into their predictions because every area of retail has different inflation levels associated with it, making it cumbersome to calculate and requiring multiple-year adjustments as inflation fluctuates.

Other forecasts also indicate slower growth in holiday sales this year. Deloitte reported retail sales growth between 2.3% to 3.3% this holiday season.

“Although the pace of increase in holiday sales will be slower than last year, we expect that healthy growth in disposable personal income, combined with a steady labor market, will support a solid holiday sales season,” said Akur Barua, an economist with Deloitte Insights. “Meanwhile, inflation is both a headwind and tailwind to holiday sales. While declining inflation aids consumers’ purchasing power, it also is expected to negatively impact the nominal rise in the dollar value of sales.”

Rising credit card debt and the possibility that many consumers have exhausted pandemic-era savings will likely weigh on sales growth this season compared to the previous one, Barua said.