NRF Reiterates Holiday Forecast, Despite Recent Economic Indicators
Despite what the National Retail Federation is calling “contradictions in recent economic indicators,” the organization continues to expect steady sales growth during the upcoming holiday season.
On October 15, the NRF forecast retail holiday sales growth of between 2.5% and 3.5% over 2023, with total sales of between $979.5 billion and $989 billion. In the weeks following its annual forecast, government data showed the economy gained only 12,000 jobs during October and gross domestic product growth slowed to 2.8% in the third quarter.
“The economic data calendar was quite busy at the end October but while there were contradictions and mixed signals, we continue to believe the U.S. economy remains in a good place,” said Jack Kleinhenz, chief economist with the National Retail Federation. “Most importantly, the new data doesn’t change our 2024 holiday forecast or retail sales projections for the year.”
Kleinhenz pinned the October job numbers on the temporary impact of Hurricanes Helene and Milton, along with several labor union strikes. GDP growth, he said, was still “surprisingly strong,” continuing a 10-quarter string of “solid” increases despite inflation and high interest rates as consumer spending “continued to contribute a lot of horsepower.”
Salaries and wages as measured by the Employment Cost Index were up 3.9% year-over-year as of September, the slowest growth since late 2021 but well above inflation, Kleinhenz said. The Personal Consumption Expenditures Price Index – the Federal Reserve’s preferred inflation gauge – fell to a year-over-year increase of 2.1% in September, a tick above the Fed’s 2% target and the lowest since February 2021.
“Putting all these considerations together, this holiday season looks very good,” Kleinhenz said. “Households are starting the season in decent financial shape and are managing the constraints of their paychecks, with growth in wages and salaries still supportive of a steady pace of spending. The economy remains on solid footing and is growing faster than many expected.”
With household balance sheets bolstered by a strong stock market and rising home values along with income, the outlook remains positive overalls, he said.
“I am optimistic about the pace of economic activity in the final quarter of the year,” Kleinhenz said. “Given third-quarter spending performance and comprehensive upward revisions in late September for income, spending, and the savings rate, I have increased confidence in the economy’s strength and the near-term outlook.”
