NRF: Strong consumer fundamentals counter inflation, interest rates in holiday forecast

The National Retail Federation (NRF) said this week it expects healthy holiday sales this year despite high inflation and rising interest rates. The group cited strong consumer fundamentals, including job growth, salary increases, and higher savings rates, as counters to the economic headwinds of 2022.

NRF forecasts holiday sales will rise between 6% and 8% this year compared to 2021, reaching between $942.6 billion and $960.4 billion. NRF said the forecast follows last year’s 13.5% growth and is above the 4.9% average over the past 10 years.

“There are many factors impacting our holiday forecast, but business conditions are generally positive as consumer fundamentals continue to support economic activity,” NRF’s Chief Economist Jack Kleinhenz said today. “Despite record levels of inflation, rising interest rates, and low levels of confidence, consumers have been steadfast in their spending and remain in the driver’s seat. The latest figures show the economy is holding together better than may have been expected.”

The group’s November economic review noted that gross domestic product (GDP) rose by 2.6% in the third quarter, and that consumer spending rose a higher than expected 0.6% in September.

“Consumers’ willingness to spend has been clearly impacted by inflation but their ability to spend has been supported by job growth, rising wages and tapping into savings accumulated during the pandemic,” NRF said in a press release Friday.

NRF also said that job growth remains strong despite a cooling labor market, and that employers are likely to continue hiring over the next few months, offsetting any pullback in spending by those already employed.

“Wages and salaries are up about 5% year over year, according to the Bureau of Labor Statistics. And Federal Reserve economists say consumers have about $1.7 trillion in savings on hand that was built up during the [pandemic],” NRF said in the release. “Credit balances are growing but remain near a historical low as a percentage of disposable income.”