NRF Says Strong Consumer Fundamentals Counter Inflation and Interest Rates in Holiday Forecast

"There are many factors impacting our holiday forecast, but business conditions are generally positive."

NRF Chief Economist Jack Kleinhenz

WASHINGTON – The National Retail Federation balanced high inflation and rising interest rates against strong consumer fundamentals as it developed its 2022 holiday spending forecast, Chief Economist Jack Kleinhenz said today.

“There are many factors impacting our holiday forecast, but business conditions are generally positive as consumer fundamentals continue to support economic activity,” Kleinhenz said. “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.”

Kleinhenz’s remarks came in the November issue of NRF’s Monthly Economic Review, which noted that gross domestic product rose by 2.6% in the third quarter. Kleinhenz called that “a healthy increase that should override any remaining fears that the economy is in a recession.”

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, the report said. September consumer spending rose 0.6% from August, which underscored that “demand remains strong and can be expected to continue.”

NRF forecast this week that holiday sales will grow between 6% and 8% over 2021 to between $942.6 billion and $960.4 billion. The forecast follows last year’s 13.5% growth driven by pandemic factors and is well above the 4.9% average over the past 10 years.

The labor market has cooled but job growth remains strong and employers will likely continue to hire in the next few months, the report said, and job gains likely offset any pullback in spending by those who are 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. Credit balances are growing but remain near a historical low as a percentage of disposable income.

The nation’s ongoing labor shortage is reflected in retailers’ holiday hiring plans. NRF expects that between 450,000 and 600,000 seasonal workers will be hired this year. That’s down from 670,000 last year but many of last year’s temporary hires became permanent employees as retailers competed not only with each other but other industries to find the best talent.

About NRF
The National Retail Federation, the world’s largest retail trade association, passionately advocates for the people, brands, policies and ideas that help retail thrive. From its headquarters in Washington, D.C., NRF empowers the industry that powers the economy. Retail is the nation’s largest private-sector employer, contributing $3.9 trillion to annual GDP and supporting one in four U.S. jobs – 52 million working Americans. For over a century, NRF has been a voice for every retailer and every retail job, educating, inspiring and communicating the powerful impact retail has on local communities and global economies.