Shoppers walk up and down an escalator at the Willow Grove Park Mall in Willow Grove, Pennsylvania on November 14, 2020.
Mark Makela | Reuters
Getting shoppers through this holiday season won’t be easy.
The National Retail Federation said on Thursday it expects holiday sales in November and December to rise between 6% and 8% from a year ago – a drop when taking into account the effect of inflation. The sales forecast excludes spending at car dealerships, gas stations and restaurants.
In September, inflation is up 8.2% year-on-year according to the Bureau of Labor Statistics consumer price index. That’s a nearly four-decade high. The NRF, for its part, pointed to the personal consumption expenditure price indexwhich was up 5.1% from a year ago, as a more appropriate comparison.
The trade group’s outlook points to a tougher holiday ahead for retailers. A year ago, consumers were buying early and spending more on freebies as stores struggled to keep shelves stocked due to shipping delays. This year, however, major retailers, including walmart and Nike swim in additional inventory. Consumers splurge less on items like clothing and electronics because they pay more for groceries and services like restaurants and travel.
NRF chief executive Matt Shay said on a call that Americans are still looking forward to this holiday season, but have become more cautious about their purchases as grocery and energy bills rise. In some cases, he said, they dip into savings accounts and turn to their credit cards to cushion their expenses.
“Some of that is going to impact their gifts and how they cover their other expenses over the holiday season,” he said.
There are still factors working in favor of retailers, said Jack Kleinhenz, chief economist for the National Retail Federation. Consumers have accumulated savings during the pandemic and the job market is strong, which may make them feel secure enough to continue spending.
Travel takes up a bigger chunk of people’s budgets, but he said they’re likely to bring food or gifts on those trips — and might also get new outfits.
According to NRF, consumers plan to spend an average of $832.84 on gifts and party items such as decorations and food. It’s roughly in line with the last 10 years, but the amount may buy less property due to inflation.
Hiring is expected to be more modest, with retailers hiring between 450,000 and 600,000 seasonal workers. This is less than the 669,800 seasonal hires in 2021.
Other industry observers have also plan for a muted holiday season. For example, consulting firm Bain & Co. predicts growth of up to 7.5% over last year, or just 1% to 3% when adjusting for inflation. AlixPartners expects an increase of 4% to 7%, which is a drop considering inflation.
The outlook comes after the pandemic fueled two years of bumper demand during the key holiday shopping season. In 2020, holiday sales increased 8.2% from the previous year to $777.3 billion, according to the NRF, as consumers rejoiced by giving freebies during the pandemic. Last year, holiday sales increased 13.5% from 2020 and totaled $889.3 billion.
The projected increase for this year would place spending between $942.6 billion and $960.4 billion.
This growth compares to an average increase of 4.9% over the past 10 years, with the past two years contributing significantly to these gains.