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WASHINGTON — The National Retail Federation (NRF) projects a strong holiday retail season, buoyed by robust third-quarter economic performance and optimistic consumer sentiment.
“This holiday season was well underway even before the traditional Black Friday rush,” said NRF chief economist Jack Kleinhenz said, emphasizing how an earlier start to shopping offset the five fewer days between Thanksgiving and Christmas compared to last year. “Conditions are shaping up for a successful season, supported by encouraging economic indicators.”
In its Monthly Economic Review, NRF reaffirmed its forecast for holiday retail sales growth of 2.5% to 3.5% over 2023. Early shopping trends suggest strong consumer engagement, with 58% of holiday shoppers beginning purchases by early November and nearly 197 million participating in Thanksgiving weekend sales, from Black Friday through Cyber Monday.
The U.S. economy grew at an annualized 2.8% in the third quarter, with personal consumption rising 3.5% year over year, demonstrating continued resilience as a key economic driver. October’s core retail sales, which exclude volatile categories like auto sales and gasoline, surged 5.4% from the same period last year.
“Consumers’ perception of the economy has improved, fueling retail activity,” said Kleinhenz. The University of Michigan’s consumer sentiment index hit 71.8 in November, its highest level since April and marking four consecutive months of gains.
Inflation, as measured by the Federal Reserve’s preferred metric, ticked up slightly to 2.3% in October from 2.1% in September but remained close to the Fed’s 2% target. Disposable income also rose by 5.1%, and wages saw a robust 5.7% increase, giving consumers more spending power despite challenges such as labor strikes and weather-related disruptions in October.
The job market added 12,000 new positions in October, tempered by external events, but unemployment remained steady at 4.1%. Employment grew by an average of 104,000 jobs over the past three months, and consumer spending maintained a solid footing, rising 5.4%.
Kleinhenz highlighted the significance of these metrics in fostering a favorable retail environment. “The economic fundamentals, including income growth and consumer spending, are solid as we move deeper into the holiday season.”
With fourth-quarter GDP projected to rise at an annualized rate of 2%, the NRF remains optimistic about the retail sector’s performance. Kleinhenz acknowledged some signs of economic moderation, such as the lag in gross domestic income growth compared to GDP, but noted these do not indicate a halt in momentum.
“Economic growth is steady, and consumers continue to demonstrate resilience,” he concluded. “This bodes well for retailers as we approach the heart of the holiday season.”
Retailers across the country are closely monitoring these trends, hoping for a robust finish to 2024 and a strong springboard into the new year.
