NRF’s holiday sales forecast optimistic, amid economic concerns

Amid the many economic concerns looming out there, including things like inflation, still-high gas prices, and moderating consumer demand, the 2022 holiday shopping season has what can really only be viewed as an optimistic outlook.

That was the word from the Washington, D.C.-based National Retail Federation (NRF) yesterday (Nov. 3), when the organization released its 2022 Holiday Season sales forecast.

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.

The holiday sales forecast numbers are encouraging, with NRF forecasting holiday retail sales for increase 6%-to-8% annually, coming in between $942.6 billion-to-$960.4 billion. In 2021, retail sales were up 13.5% compared to 2020, due likely to the timing of the pandemic in 2020, at $899.3 billion, setting a new all-time record. What’s more, it said that over the last 10 years, holiday retail sales have seen an average increase of 4.9%, with the caveat that pandemic-related spending over the last couple of years represented a large portion of those gains.

Not surprisingly, NRF said it expects e-commerce to play a significant role in 2022 holiday sales, with online and other non-store sales pegged to increase between 10%-to-12%, coming in between $262.8 billion and $267.6 billion, ahead of 2021’s $238.9 billion tally. Which NRF said was largely driven by consumers’ e-commerce activity in buying holiday goods, while adding that it is likely that households will transition some holiday shopping back to in-store shopping and what it called a more traditional holiday shopping experience.

On a media conference call, NRF President and CEO Matthew Shay described 2022 as another historic year in retail and for consumers against the backdrop of challenging economic conditions, in regards to elevated levels of inflation, and rising interest rates, which are playing a role in the way in which consumers are behaving.

“In the face of these challenges and the uncertainty that is taking place across the economy, consumers are taking things a bit more thoughtfully and cautiously but…continue to spend on household priorities,” he said. “The fact that they continue to spend makes sense, when you consider what is happening in the labor market, job growth, rising wages, and how consumers are offsetting the difference between their monthly expenses and their earnings by tapping into savings and, in some cases, taking on additional credit and debt.”

What’s more, Shay highlighted how retail sales since May 2020, 60 days after the onset of the pandemic, have shown that consumers have been consistently driving the economy forward. Taking that a step further, he said that over the first nine months of 2022 retail sales are up 7.2% annually, which is in line with NRF’s calendar year 2022 forecast of 6%-to-8% growth.

He added that consumers are looking for discounts, deals, and value to stretch their dollars in the face of higher energy prices and housing prices, adding it is likely to continue over the holiday season, with consumers looking for bargains and values, as the season begins in earnest.

Addressing NRF’s holiday season forecast, Shay said that consistently over the last decade consumers are out in the market earlier than ever, as the holiday season is getting extended into the fall, with retailers finding ways to meet consumer expectations and deliver value.

NRF Chief Economist Jack Kleinhenz said on the call that various factors are taken into consideration when looking at the major factors influencing consumer spending and retail sales, including wages, past retail sales, and consumer credit.

“Overall, we feel generally very positive that consumer fundamentals will continue to support economic activity despite record levels of inflation, and rising interest rates,” he said. “And even to the extent that there has been a low level of confidence, consumers have been steadfast in their spending. We saw that last week, with third quarter GDP up 2.6% annually after two quarters of contraction. This should override any concern, at this time, that the economy is in recession. We expect the economy to grow for the remainder of 2022 but at a slower pace than we saw in the third quarter. Consumers are worried about inflation—it is at the top of their mind—but they still have the ability to spend. This has been supported by job growth, rising wages, and tapping into savings.”

He added that although there is still a certain amount of uncertainty the labor market is moving forward in a pretty good way, with the strength of the labor market which is really fueling retail spending, amid inflation. And he added that demand for labor remains strong.

“While there is turnover, workers are able, in a very short period, to find a new job,” he said. “There is no indication right now that we are seeing any layoffs picking up, and we do expect job gains to tend to offset any pullback in spending.”

If there was any doubt that holiday spending numbers would be down this year, due to the aforementioned factors cited, then the NRF’s forecast helps to quell those notions. These are challenging times, no question, but the resilient strength of consumer spending is continuing to forge the path to economic growth.