Inflation might dampen holiday spending

This holiday season might be challenging for retailers in the US as a section of consumers might “supplement spending with savings” amid rising inflationary pressures.

Although the National Retail Federation (NRF) expects holiday spending to be “healthy” retail sales during November and December are expected to grow between 6% and 8% over 2021. This is lower compared to a record-breaking 13.5% of holiday sales is 2021 over 2020.

Meanwhile, according to NRF, holiday retail sales have seen a 4.9% increase on an average over the past decade. Going by this data retail sales during the holiday season post-pandemic has recorded “considerable gains.”

Commenting on this year’s holiday sales outlook, NRF President and CEO Matthew Shay said, “While consumers are feeling the pressure of inflation and higher prices, and while there is continued stratification with consumer spending and behaviour among households at different income levels, consumers remain resilient and continue to engage in commerce. 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.”

In what seems to be a positive indication for brick-and-mortar retail consumers are returning to stores for their holiday shopping. This is in stark contrast to 2021 when consumers preferred shopping online during the pandemic. Meanwhile according to NRF, this year’s holiday retail sales including online and offline are expected to increase 10% and 12% to touch $262.8 billion and $267.6 billion up from $238.9 billion in 2021.

Interestingly, shoppers starting their holiday shopping early seems to be a trend that’s taking ground not only in the US but also in the MENA region, perhaps driven by to find the right products and the best deals as well as concerns about inflation.

“This holiday season cycle is anything but typical,” stated NRF Chief Economist Jack Kleinhenz. “NRF’s holiday forecast takes a number of factors into consideration, but the overall outlook is generally positive as consumer fundamentals continue to support economic activity. Despite record levels of inflation, rising interest rates and low levels of confidence, consumers have been steadfast in their spending and remain in the driver’s seat.”