Resilient Holiday Shoppers Primed to Overcome Market Woes
National Retail Federation Forecasts $1 Trillion Season
Key Takeaways:
- NRF predicts retail sales will grow between 3.7% and 4.2% year over year in November and December.
- Total spending is projected tol be between $1.01 trillion and $1.02 trillion.
- NRF data shows that consumer spending accounts for more than 68% of the national gross domestic product.
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Consumers are expected to overcome choppy and uncertain conditions to deliver a record holiday sales season, according to the .
The NRF annual holiday forecast Nov. 6 predicted retail sales will grow between 3.7% and 4.2% year over year in November and December. This will bring total spending between $1.01 trillion and $1.02 trillion. The research found that while consumers remain cautious, they are still fundamentally strong in ways that continue to drive economic activity.
“Over the course of this year, the American consuming public, the business community and retailers have faced heightened political and economic uncertainty,” NRF CEO Matthew Shay said during a media call. “Certainly as it relates to what’s happening with inflation, the impact of trade policies changing, stop and starting again on tariffs … and then more recently, the government shutdown.”
President Donald Trump signed a government funding bill the night of Nov. 12, ending a record 43-day shutdown. The signing ceremony came just hours after the House passed the measure on a mostly party-line vote of 222-209. The Senate had already passed the measure Nov. 10.
Holiday are set to surpass $1 trillion for the first time ever! Despite economic challenges, consumers remain resilient and ready to spend. Average planned spend: $890.49 per person. — National Retail Federation (@NRFnews)
Shay pointed out that the consumer outlook on the economy is low compared with historic norms.
“Yet, they continue to spend and power the economy,” Shay said. “They have the ability to do two things at once. They have expressed very low sentiment, yet they drive the economy forward with spending and aggressive participation in commerce. That’s an interesting feature, but it’s been present really for the last five years, since we were in the lows of the pandemic.”
NRF numbers show that consumer spending accounts for more than 68% of the national gross domestic product. This marks the highest proportion in nearly 15 years with how consumer behavior and consumption have continued to change and play a bigger role in the economy. Shay noted that this could become the first time the holiday sales season exceeds $1 trillion.
October retail sales data from the CNBC/NRF Retail Monitor, powered by , shows ‘strong momentum’ going into the holiday season. — National Retail Federation (@NRFnews)
“We’ve seen spending behavior that is very strong through the year, but we know that inside of that strength, consumers are being much more price sensitive,” Shay said. “And we know they have adjusted the way they spend month to month. We know they are thinking about things much more deliberately, trading down, looking for less expensive options, trying to find value wherever they can find it. We know there’s a great deal of price sensitivity.”
Shay indicated that some of this shift in consumer behavior revolves around people emphasizing friends and family, especially during the holidays, over the past five years. He noted that these events have garnered outsized importance to households as an opportunity for celebration.
“The winter holidays, of course, out of all the holidays throughout the year, are really the biggest events when it comes to holiday spending, and we’re bullish,” Shay said. “We analyze key indicators that include consumer spending, disposable income, employment, wages and wage growth, inflation, monthly retail sales, about 20 different categories, and that’s been consistent for many years, the things we look at.”
NRF data also showed retailers are expected to hire between 265,000 and 365,000 seasonal workers, which would be the lowest level in more than 15 years. Shay suspects this reflects the softening and slowing labor market, but he is confident that retailers will be prepared to support their customers during the holiday season.
Mark Mathews, NRF Chief Economist, talks through NRF’s winter holiday data and invites you to join NRF’s holiday webinar on November 12th. — National Retail Federation (@NRFnews)
“Consumers remain pretty concerned about inflation, and there’s no doubt there’s a lot of uncertainty about where prices are headed,” said Mark Mathews, chief economist and executive director of research at NRF. “Sentiment is low. It’s been slightly lower a couple of times in the past three-year period, driven primarily by the post-pandemic inflation crisis.”
Mathews echoed the point that consumers continue to spend irrespective of their outlook. He described this split as the consumer being sentimentally weak but fundamentally sound. Mathews noted their balance sheets were driven by an enthusiastic equities market, while disposable incomes remained robust on an inflation-adjusted basis.
“When we remove the anomalous pandemic years, real disposable income has only been at a higher level at one point in history,” Mathews said. “Wages have now exceeded inflation for over 30 months, so we have had real wage growth for 30 months […]. Unemployment remains in check. Now, to be fair, the unemployment rate has ticked up slowly over the past few years. But it still remains at historically low levels.”
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