This year’s projected rise in holiday spending will be surpassed by inflation, according to a forecast from the National Retail Federation.
Holiday retail sales are expected to grow between 6% and 8% since last year to possibly surpass $960 billion, according to the trade association. Although the growth appears to exceed the average 4.9% annual increase witnessed over the past decade, the expansion will be entirely eclipsed by inflation, which rose year-over-year at an 8.2% rate as of two months ago, according to a report from the Bureau of Labor Statistics.
“While consumers are feeling the pressure of inflation and higher prices, and while there is continued stratification with consumer spending and behavior among households at different income levels, consumers remain resilient and continue to engage in commerce,” National Retail Federation CEO Matthew Shay said in a press release. “In the face of these challenges, many households will supplement spending with savings and credit to provide a cushion and result in a positive holiday season.”
Indeed, households have been spending beyond their means amid elevated price pressures. The total level of consumer loans increased from $1.5 trillion at the beginning of President Joe Biden’s tenure to $1.8 trillion as of two months ago, according to data from the Federal Reserve. Meanwhile, the personal savings rate has dropped from 20% to slightly more than 3% over the same period, according to data from the Bureau of Economic Analysis, marking a significant decline from typical rates witnessed before the lockdown-induced recession.
Consumers plan to allocate roughly $832 for gifts, decorations, food, and other holiday expenditures, in line with averages seen over the past decade. With respect to non-store and online sales, the National Retail Foundation predicts increases between 10% and 12% as consumers increasingly rely upon online shopping. Some consumers, however, will return to traditional in-store experiences.
“The holiday shopping season kicked off earlier this year — a growing trend in recent years — as shoppers are concerned about inflation and availability of products,” National Retail Foundation chief economist Jack Kleinhenz commented. “Retailers are responding to that demand, as we saw several major scheduled buying events in October. While this may result in some sales being pulled forward, we expect to see continued deals and promotions throughout the remaining months.”
Even ahead of the Christmas season, many American families are expected to face added cost pressures during Thanksgiving celebrations. As an outbreak of the avian flu impacts poultry farms across the country, prices for an eight-pound hen have increased from $1.15 per pound last year to $1.47 per pound this year, according to data from the Department of Agriculture, with residents of the northeastern United States preparing to pay the most on average.
Various economic bottlenecks have decreased living standards in the United States as citizens prepare to vote in the midterm elections. Polls show that voters have their eyes on the economy and inflation more than any other issue. One survey from ABC News and The Washington Post found that 84% of voters identify the economy as their top concern, while the Republicans lead the Democrats by a double-digit margin concerning trust in handling the economy.