NRF calls for solid 2023 Holiday Season retail sales

While the overall trajectory of the economy is mixed, to a degree, consumer spending, which accounts for roughly 70% of United States economic activity, looks to be active over the course of the 2023 holiday shopping season.

That was made clear in the Washington, D.C.-based National Retail Federation’s (NRF) 2023 Holiday Season sales forecast, which was issued today.

NRF defines holiday sales as sales occurring between November 1 and December 31, excluding automobile dealers, gasoline stations, and restaurants, to focus on core retail.

As was the case a year ago, NRF’s holiday sales forecast numbers are optimistic and positive, with 2023 holiday season retail sales pegged to be up 3%-to-4% annually, coming in between $957.3 billion and $966.6 billion.

While this projected 3%-to-4% growth rate is below the 6%-to-8% called for last year, which was buoyed by trillions of dollars of federal stimulus driving what the NRF called “unprecedented rates of retail spending during the pandemic,” NRF said that the 2023 estimate is more in line with the average annual holiday increase, of 3.6%, from 2010 to 2019.

Once again, NRF is expecting e-commerce to be a major driver of holiday season retail sales, with online and other non-store sale (which are included in NRF’s total retail sales projection tally) are estimated to see a 7%-to-9% increase, coming in between $273.7 billion and $278.8 billion, topping last year’s $255.8 billion projection.

NRF President and CEO Matthew Shay said on a media conference call earlier today that in spite of the economic uncertainty and challenges that households are facing, there has been strength and resilience across the consumer sector.

“There's been an evolution in the way consumers are allocating their dollars from month to month on their spending,” he said. “And yet consumer spending, which makes up approximately 70% of our economic activity, has kept the economic expansion on a on a steady and solid path forward.

But he added that consumers are becoming more cautious in the face of inflation and rising interest rates and the impact of monetary policy decisions, as they continue to spend on household priorities, coupled with their capacity to spend and their resources to devote to those priorities, especially on essential items. has been supported by wage growth and the resilience and strength of the job market historically low unemployment rates.

“We think that that's going to continue to support consumer activity throughout the holiday season,” said Shay.

Shay also raised the point how over the last several years, consumers continue to get an earlier start on holiday shopping, embracing an earlier kickoff into the holiday season, with retailers meeting that expectation, in the form of summer deals and promotions. And he explained that has helped consumers find the right deals, allocate their dollars, and stretch their budgets, all of which contribute to a total increase in aggregate spending.

To that end, he cited NRF’s consumer research showed that, in recent years, nearly half of holiday shoppers, 43%, start browsing ang buying before November.  

NRF Chief Economist Jack Kleinhenz said on the call that consumers remain in the driver’s seat and are a major factor in holiday spending. And he noted that while the economy is holding together pretty well, the advance third quarter GDP estimate, at 4.9%, was exceptional, but may be due to various factors, or one-offs, related to inventories and inventory accumulation, as well as government spending.

“There are also some mounting headwinds that remain in place,” he said. “Consumers continue to lack confidence in the economy. Some of the data has come out suggest that consumers near term outlook for income business and job market conditions are weighed down by the higher interest rate and inflation expectations and there is some issues relative to borrowing costs and some political stress.”

Addressing inflation, Kleinhenz said that the 12-month change in inflation appears to be coming down, perhaps even a little bit faster than the Federal Reserve anticipated.

“I know inflation still persists, but a good factor that we're seeing is that the households have been able to navigate reasonably well through how much of this inflation,” he said.

While 2022 holiday season retail sales ended up topping expectations, increasing 5.4% annually, Kleinhenz observed that it reflected rising rates of inflation and excess savings at that time.