The holiday shopping season has launched with promising momentum, as strong third-quarter economic performance and robust consumer activity suggest a solid close to the year.
Jack Kleinhenz, Chief Economist at the National Retail Federation (NRF), remarked, “Even though the traditional kick-off to the holiday season started with Black Friday, this holiday shopping season was already in full swing.”
He attributed this early start to a shorter window between Thanksgiving and Christmas this year, with five fewer shopping days compared to 2023.
This proactive behaviour was evident as 58% of holiday shoppers began purchasing by early November, according to NRF data. The organisation forecasts retail sales during November and December to grow between 2.5% and 3.5% over last year, reflecting sustained consumer confidence and early engagement.
Economic growth fuels retail confidence
Kleinhenz emphasised the resilience of the U.S. economy in the third quarter, noting, “Gross domestic product expanded more than many estimates of the economy’s long-run potential capacity.”
Personal consumption, a key driver of economic health, rose by 3.5% year-on-year, bolstering the retail sector. Core retail sales, excluding categories like automobiles and gasoline, were up 5.4% unadjusted in October compared to the same month last year.
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By GlobalDataMeanwhile, consumer sentiment improved significantly, with the University of Michigan’s survey reaching its highest level since April at 71.8. “Consumers’ view of the economy has improved, and they remain supportive of retail sales,” Kleinhenz explained.
However, he pointed to mixed indicators. Gross domestic income (GDI) lagged behind GDP for a second consecutive quarter, signalling some economic softening.
Despite this, NRF expects fourth-quarter GDP growth to maintain a steady annualised pace of 2%.
Resilient spending amid challenges
October’s employment figures presented a mixed picture, with only 12,000 new jobs created due to hurricanes and strikes. However, the unemployment rate held steady at 4.1%, and three-month average job gains reached 104,000.
Disposable income grew by 5.1% year-over-year in October, while employee compensation surged 5.7%, underpinning robust consumer spending.
Kleinhenz observed, “Consumption was up 5.4%, even as the personal saving rate increased to 4.4%.” Inflation trends also supported economic stability, with the Federal Reserve’s preferred measure, the Personal Consumption Expenditures Price Index, rising to 2.3% in October.
This figure remains close to the Fed’s 2% target, indicating a controlled inflation environment. The NRF’s Monthly Economic Review underscores these dynamics, painting a picture of cautious optimism for the retail sector.
As Kleinhenz concluded, “Conditions are shaping up for a successful holiday retail season,” bolstered by steady economic growth, improved consumer sentiment, and resilient spending power.
