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Holiday shopping forecast details growth in consumer spending, some economic signals show otherwise

Posted at 2:36 PM, Nov 04, 2022

How much money do you plan on spending this holiday season?

A forecast released Thursday by the National Retail Federation expects to see a 6 to 8 percent growth in holiday spending over 2021.

“The overall outlook from those consumer fundamentals are very positive and support what we believe is a fairly good forecast,” said Jack Kleinhenz, chief economist of the National Retail Federation.

Keep in mind this does not include vehicles, gas, or food services. Just retail more broadly. The National Retail Federation said a few factors are at play here.

“Strong job and income growth has been important,” Kleinhenz said. “More jobs means more income, more spending.”

A jobs report released Friday shows the payroll grew by 261,000 in October, according to the Labor Department.

Kleinhenz said consumers also have a good bit of savings to spend from when everyone was saving during the pandemic.

“We can't minimize the importance of the ability for people to tap into their savings in many cases,” he said.

Kleinhenz said credit is also a factor. “Credit availability has supported spending.”

However, this forecast is not adjusted for inflation. The Consumer Price Index has climbed over 8 percent in the past year. If you take out food and energy, that number is around 6.5%. CPI is weighted toward essentials, but things like electronics and clothing aren’t going up at the same rate.

Some forecasts are not so optimistic.

Consulting firm McKinsey & Company said consumer demand has softened and inventory levels are high in an October holiday shopping report. They also mentioned many consumers are eager to spend and splurge.

International shipping company Maersk wrote in their Q3 report released Wednesday:

“With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession there are plenty of dark clouds on the horizon. This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand.”

They did see an increase in revenue in the third quarter. Maersk is the world’s largest container and shipping company.

Whether you decide to save or splurge this year, experts seem to be at odds with spending habits this holiday season.