NRF Upgrades Holiday Growth Forecast on Strong Recent Momentum

The 2021 holiday season is poised to top the National Retail Federation's strong growth forecast, despite supply chain disruptions, inflation, early shopping and concerns over the COVID-19 omicron variant, said NRF Chief Economist Jack Kleinhenz Friday.

NRF said in October (see 2110270035) that holiday receipts Nov. 1-Dec. 31 would grow 8.5%-10.5% to $843.4 billion-$859 billion; it now sees growth of 11.5%. Consumers and retailers have “revised their playbooks and broken with previous traditions,” Kleinhenz said, saying momentum so far this holiday season makes it “probable that we will exceed our initial projection.”

“The holiday season clearly looks to be off to a good start” with consumers “in solid financial shape,” Kleinhenz said. With shopping starting earlier, the five-day Thanksgiving weekend “now helps to mark off the holiday season rather than serving as the kickoff it once was.”

Kleinhenz called the COVID-19 omicron variant “the latest wild card raising uncertainty around the economic outlook” but said it's too early to predict what impact it will have on the economy.

The first official holiday results won’t be known until the Census Bureau reports November sales Dec. 15, but overall consumer spending -- beyond just retail sales -- rose by 1.3% in October, and “there was no evidence of a pullback” despite inflationary price increases caused by supply chain disruptions and higher demand, Kleinhenz said. The Personal Consumer Expenditures Price Index posted 5% year-over-year inflation for October, but core retail categories were up only 3.3%, he noted.

The economist cited a 4.1% boost in disposable personal income over the past year and 12% higher spending. Initial unemployment claims fell to their lowest level since 1969 the weekend before Thanksgiving, and 546,000 jobs were added to payrolls in October, followed by another 210,000 in November, Kleinhenz said. The November unemployment rate fell to a pandemic low of 4.2%, he said.

The increased retail sales and strong economic indicators come despite falling consumer confidence. The University of Michigan Index of Consumer Sentiment declined to 67.4 in November, its lowest level in a decade, but Kleinhenz called spending data "a more relevant measure of consumer behavior."