Holiday retail sales are a closely watched measure of the health of the American consumer and are often the most lucrative time of year for major retailers. Even in tough financial times, the question is not whether Americans will spend during the holidays, but how much.
As the Federal Reserve works to reduce inflation by raising interest rates, Wall Street and retail executives are keeping a close eye on consumer spending. Despite the Fed’s efforts, an economic recession remains elusive as shoppers spend heavily on seasonal items in the fall. On Wednesday, the Fed kept its benchmark interest rate steady at 5.25 to 5.5 percent, but said it could still raise rates again.
The trade group noted a variety of economic pressures that U.S. consumers face during the holidays: While student loan repayments resumed last month after a three-year pause, consumer confidence has fallen as borrowing costs remain high. remains, and credit card balances are high.
“We all recognize that there are some headwinds that are affecting consumers, and they will continue to play a role in the final months of this year,” Matthew Shay, chief executive of the National Retail Federation, said on the call. “Despite uncertainty in the economy and challenges facing families, we have seen strength and resilience in the consumer sector.”
The organization highlighted signs of optimism in the economy: the labor market remains strong, and summer GDP grew at an annual rate of 4.9 percent.
“The cumulative effect of all these things is going to show some softness in consumer behavior compared to holiday spending over the past several years,” Mr. Shay said. He described mobility as “predictable and ultimately inevitable” as the economy normalizes coming out of the pandemic.
Growth in holiday sales this year is projected to be lower than in previous years. In 2022, holiday sales are projected to reach $936.3 billion, up 5.3 percent from a year earlier. There was an increase of 12.7 percent in 2021.
The average holiday sales growth from 2010 to 2019 (just before the pandemic) was 3.6 percent, the organization said.
what will happen next
This month, major retailers like Walmart, Target and Macy’s will report quarterly earnings and are expected to give their outlook on the fourth quarter. Over the summer, major retailers warned that they were seeing a slowdown in spending and that their customers were indicating they were more financially stressed than before.
Target is seeing a slowdown among shoppers, even in categories where people continued shopping despite higher prices, said Brian Cornell, the retailer’s chief executive. told cnbc on Thursday.
“They’re really managing that budget carefully,” Mr. Cornell said of Target buyers. “In discretionary items we have seen seven consecutive quarters of decline in both dollars and units.”