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11/03/2021

NRF: Consumers Are Spending ‘Because They Can’

The 2021 holiday season is already underway, and some experts are anticipating record sales growth.
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That’s according to the National Retail Federation (NRF), which has painted a rosy retail picture despite economic changes and challenges. NRF is predicting holiday sales during November and December will grow between 8.5% and 10.5% to $843.4 billion and $859 billion, compared to 2020 sales.

However, there are a number of uncertainties impacting the economy, including inflation, supply chain challenges and a labor crunch. In addition, COVID-19 is still playing a major role in the economy, though cases have been on a downward trend as of late. 

“There are several factors coming together to have a major impact on the holiday outlook, but household fundamentals are a bright spot in the uncertain present,” NRF Chief Economist Jack Kleinhenz said in a statement. “Consumers are in a very favorable position going into the last months of the year and are spending because they can.”

NRF is expecting that even at the low end of its forecast, 2021 holiday sales will top last year’s $777.3 billion in sales. Consumers are in a stronger position this year, with more disposable income and a “savings buffer” of about $2.5 trillion across the nation. Consumers were able to save money last year by staying home rather than dining out or traveling during the pandemic. Those savings have supercharged spending, according to Kleinhenz. 

The first nine months of 2021 saw 14.5% sales growth over the same time period last year, and many retail categories have returned to pre-pandemic levels. There are still consumers facing financial difficulties after losing jobs last year, NRF noted, but spending by low-income consumers was up 22.3% at the end of September compared to pre-pandemic January 2020 levels, according to data tracked by Harvard University.

All told, the stronger consumer position and savings stockpile are encouraging signs for seasonal spending. If sales do drop, it may be more challenging to decipher if it's due to a lack of product availability and supply chain issues or weaker consumer demand.