Strong results during the third quarter and continued growth in key economic data since then have set the stage for a solid holiday season.
“Even though the traditional kick-off to the holiday season started with Black Friday, this holiday shopping season was already in full swing,” says National Retail Federation Chief Economist Jack Kleinhenz. “Based on data seen so far, conditions are shaping up for a successful holiday retail season.”
Kleinhenz notes that many consumers started their holiday shopping earlier because a late Thanksgiving holiday left five fewer shopping days before Christmas than last year.
He adds that U.S. economic growth remained strong in the third quarter, with gross domestic product expanding more than many estimates of the economy’s long-run potential capacity. Additionally, personal consumption continues to drive the economy.
Kleinhenz’s comments came in the December edition of NRF’s Monthly Economic Review, which stated that NRF is standing by its forecast that retail sales during the November-December holiday season will grow between 2.5% and 3.5% over 2023. A near-record 197 million people shopped during the holiday weekend from Thanksgiving through Cyber Monday, and 58% of holiday shoppers started by early November.
“Consumers’ view of the economy has improved and they remain supportive of retail sales,” says Kleinhenz, adding that the University of Michigan’s consumer sentiment survey climbed for the fourth consecutive month in November as well.
GDP grew at an annual rate of 2.8% in the third quarter, while personal consumption was up 3.5% year over year. Gross domestic income, which measures the income earned while producing the goods and services measured by GDP, lagged behind GDP for a second quarter in a row at 2.2%, which NRF says added to the argument that the economy is slowing but neither indicates that growth has halted. NRF expects fourth-quarter GDP to be up by an annualized pace of 2%.
Only 12,000 new jobs were created in October amid two hurricanes and multiple major labor strikes. Yet unemployment held steady at 4.1% while employment went up by 104,000 jobs on a three-month average, and consumer spending “currently remains on solid footing,” according to NRF. Disposable income was up 5.1% year over year in October, and employee compensation was up 5.7%. Consumption was up 5.4% as well, even as the personal saving rate increased to 4.4%.
Year-over-year inflation as measured by the Federal Reserve’s preferred Personal Consumption Expenditures Price Index rose to 2.3% in October from 2.1% in September but has been on a downward trend and is close to the Fed’s target of 2%.
