October 27, 2021
Holiday spending has the potential to shatter previous records, according to a forecast released by the National Retail Federation. The NRF predicts that holiday sales during November and December will grow between 8.5% and 10.5% over 2020 to between $843.4 billion and $859 billion. The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with a previous high of 8.2% in 2020 to $777.3 billion and an average increase of 4.4% over the past five years.
“Overall, 2021 has been a much better year,” says Matthew Shay, president and chief executive officer, NRF. “There is considerable momentum heading into the holiday shopping season. Consumers are in a very favorable position going into the last few months of the year as income is rising and household balance sheets have never been stronger. Retailers are making significant investments in their supply chains and spending heavily to ensure they have products on their shelves to meet this time of exceptional consumer demand.”
NRF expects that online and other non-store sales, which are included in the total, will increase between 11% and 15% to a total of between $218.3 billion and $226.2 billion driven by online purchases. In comparison, that number is up from $196.7 billion in 2020.
According to the NRF, last year saw extraordinary growth in digital channels as consumers turned to online shopping to meet their holiday needs during the pandemic. While e-commerce will remain important, households are also expected to shift back to in-store shopping and a more traditional holiday shopping experience.
“The outlook for the holiday season looks very bright,” says Jack Kleinhenz, chief economist, NRF. “The unusual and beneficial position we find ourselves in is that households have increased spending vigorously throughout most of 2021 and remain with plenty of holiday purchasing power.”
“Pandemic-related supply chain disruptions have caused shortages of merchandise and most of this year’s inflationary pressure,” says Kleinhenz. “With the prospect of consumers seeking to shop early, inventories may be pulled down sooner and shortages may develop in the later weeks of the shopping season. However, if retailers can keep merchandise on the shelves and merchandise arrives before Christmas, it could be a stellar holiday sales season.”
While it appears new COVID-19 infections and hospitalizations are down, a variant surge could potentially sidetrack the current trajectory of spending. Kleinhenz says strong household fundamentals provide optimism amid the uncertainty. Income is growing from wage compensation and household wealth has reached another record high. These together support strong spending this holiday season.
NRF expects retailers will hire between 500,000 and 665,000 seasonal workers. That compares with 486,000 seasonal hires in 2020. Some of this hiring may have been pulled into October as many retailers encouraged households to shop early to avoid a lack of inventory and shipping delays. With the earlier start retailers have announced thousands of open positions in brick-and-mortar stores and warehouse and distribution centers.
The NRF also says that weather traditionally factors into holiday sales. This year, the National Oceanic and Atmospheric Administration is predicting a high likelihood of a La Niña pattern of cooler and wetter weather in the north and warmer and drier weather in the south. This climate phenomenon has in the past correlated with stronger retail sales and could be a factor in 2021.
NRF's holiday forecast is based on economic modeling that considers a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit, previous retail sales and weather. NRF defines the holiday season as Nov. 1 through Dec. 31.
The methodology used to calculate holiday retail employment in 2020 was changed to accommodate the sizeable impact of COVID-19 on overall industry employment. In 2021, NRF returned to a traditional employment buildup method.
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