Key Points
- Americans are expected to spend an average of $1,000 per person, marking a 3.8% increase in holiday retail sales.
- Inflation and food prices remain significant concerns despite recent declines in consumer price inflation.
- Walmart projects strong holiday sales, while Target expects cautious spending and announces discounts.
- The time between Thanksgiving and Christmas poses logistical challenges for retailers.
According to the National Retail Federation (NRF), Americans are forecasted to spend at record levels this holiday season, averaging nearly $1,000 per person over November and December. This anticipated 3.8% increase in retail spending comes despite lingering concerns about inflation and cost-of-living pressures.
The optimism in holiday spending contrasts sharply with voter sentiment about the economy. In exit polls, 75% of voters expressed experiencing “moderate or severe” hardship due to inflation, and nearly half felt financially worse off than four years ago. Although inflation has cooled significantly since its July 2022 peak of 9.1%, food prices remain substantially higher than pre-pandemic levels. The Farm Bureau reported that the cost of a traditional Thanksgiving meal, while 5% lower than last year, is still 19% higher than in 2019.
Mastercard’s SpendingPulse predicts a 3.2% rise in online and in-store holiday spending, indicating consumer resilience. This is supported by a robust job market where wage growth has outpaced inflation over the past two years. Retailers like Walmart remain optimistic, raising their sales forecasts, while others like Target caution that stretched budgets may lead to more price-conscious shopping. Target has announced plans for additional discounts to compete with rivals.
Travel is also expected to boom this holiday season, with the Transportation Security Administration (TSA) forecasting record numbers. More than 18 million passengers are expected to pass through U.S. airports during Thanksgiving, and AAA anticipates that 80 million Americans will travel by car. Falling gas prices, nearing a national average of $3 per gallon, are expected to ease travel costs further.
Despite these positive indicators, challenges persist. Consumers are still grappling with the cumulative impacts of inflation, and retailers face pressure to meet demand while addressing price sensitivity. The shortened holiday shopping window between Thanksgiving and Christmas adds another complexity for businesses aiming to capture seasonal sales.
Katherine Cullen of the NRF highlighted the importance of holiday spending, stating, “The winter holidays are a treasured time for Americans, and they are prioritizing spending on family this season.” Retailers are preparing with earlier deals and ample inventory to cater to demand.
