The National Retail Federation (NRF) forecasts that holiday spending is expected to reach record levels during November and December and will grow between 3% and 4% over 2022 to between $957.3 billion and $966.6 billion.
Despite the uncertainty of the economy and the variety of challenges that American households are facing, consumers are showing resilience and generating a strong retail sector — especially as we enter the holiday shopping period.
“The evolution in the way consumers are allocating their dollars month-to-month, which makes up 70% of economic activity, has kept the economic expansion on a solid path forward,” says NRF President and CEO Matthew Shay. “We are also at a historically low unemployment rate, which we think will continue to support consumer activity throughout the holiday season.”
Biggest Holiday Spending Segments
Online shopping has been one of the biggest shifts in consumer behavior from the COVID-19 pandemic. Online and other non-store sales, which are included in the total, are expected to increase between 7% and 9% to a total of between $273.7 billion and $278.8 billion. That figure is up from $255.8 billion last year, according to NRF.
“Consistent with the last few years, 58% of consumers plan to shop online, 49% plan to shop at department stores, 48% plan to shop at discount stores and 44% plan to shop at grocery stores and supermarkets. We see distribution across segments, experiences and categories, which speaks to the way consumers have evolved and how retailers have adapted their offerings,” Shay says.
“For all that the consumer has kept the economy afloat, the composition of spending from goods to services will also define holiday sales trends,” NRF Chief Economist Jack Kleinhen says. “Service spending growth is strong and is growing faster than goods spending. The amount of spending on services is back in line with pre-pandemic trends.”
Consumer Spending Trends
According to Shay, over the last several years, shoppers continue to get an early start on their holiday gift purchases. Retailers are also meeting this expectation, even going all the way back to the summer with different deals and promotions. This early start helps consumers find the right deals, allocate their dollars and stretch their budgets — all contributing to the total increase in aggregate spending.
“Our research shows that over the last few years, almost half of holiday shoppers start browsing and buying before November. So gone are the days when the Friday after Thanksgiving was the kickoff,” Shay says. “As important as that weekend remains, we know 4-out-of-10 shoppers are taking advantage of retail special events earlier in the season, which results in some sales being pulled forward.”
Meeting the Demand of Holiday Spending
To meet the demand of the holiday season, NRF expects retailers will hire between 345,000 and 450,000 seasonal workers, in line with 391,000 seasonal hires in 2022. Some of this hiring may have been pulled into October to support retailers’ holiday buying events in October.
Despite months of preparation for the holiday season, retailers could sustain unpredictable impacts from weather. This year, holiday retail spending may experience residual effects from El Niño, depending on the strength and persistence of the weather phenomena.
