The National Retail Federation expects steady sales growth for the winter holiday season despite contradictions in the latest economic indicators.
“The economic data calendar was quite busy at the end of October, but while there were contradictions and mixed signals, we continue to believe the U.S. economy remains in a good place,” says NRF Chief Economist Jack Kleinhenz. “Most importantly, the new data doesn’t change our 2024 holiday forecast or retail sales projections for the year.”
NRF forecast on Oct. 15 that retail sales during the November-December holiday season would increase between 2.5% and 3.5% over 2023 to a total of between $979.5 billion and $989 billion, saying that the economy “remains fundamentally healthy and continues to maintain its momentum.”
Two weeks later, government data showed that the economy had gained only 12,000 jobs during October and that the annual pace of gross domestic product growth had slowed to 2.8% in the third quarter of the year compared with 3% in the second quarter.
Kleinhenz attributes the drop in job numbers to the temporary impact of Hurricanes Helene and Milton along with major labor union strikes. He adds that employment still gained 104,000 jobs on a three-month average, and GDP growth was still “surprisingly strong” continuing a 10-quarter string of solid increases despite inflation and high interest rates.
Salaries and wages as measured by the Employment Cost Index are up 3.9% year over year as of September, the slowest growth since late 2021 but these figures are above inflation, Kleinhenz says. The Personal Consumption Expenditures Price Index — the Federal Reserve’s preferred inflation gauge — fell to a year-over-year increase of 2.1% in September. Currently, inflation is being driven almost entirely by services rather than goods.
“Putting all these considerations together, this holiday season looks very good,” says Kleinhenz. “Households are starting the season in decent financial shape and are managing the constraints of their paychecks, with growth in wages and salaries still supportive of a steady pace of spending. The economy remains on solid footing and is growing faster than many expected.”
With household balance sheets bolstered by a strong stock market and rising home values along with income, the outlook remains positive overall.
“I am optimistic about the pace of economic activity in the final quarter of the year,” says Kleinhenz. “Given third-quarter spending performance and comprehensive upward revisions in late September for income, spending and the savings rate, I have increased confidence in the economy’s strength and the near-term outlook.”
