Strong results during the third quarter and continued growth in key economic data since then have set the stage for a solid holiday season, according to National Retail Federation Chief Economist Jack Kleinhenz.
“Even though the traditional kick-off to the holiday season started with Black Friday, this holiday shopping season was already in full swing,” Kleinhenz said, noting that many shoppers started earlier because a late Thanksgiving has left five fewer shopping days before Christmas than last year. “Based on data seen so far, conditions are shaping up for a successful holiday retail season.
“US economic growth remained strong in the third quarter, with gross domestic product expanding more than many estimates of the economy’s long-run potential capacity. Personal consumption continues to provide the horsepower behind the economy, as it has throughout this expansion.”
Kleinhenz’s comments came in the December edition of NRF’s Monthly Economic Review, which said NRF stands by its forecast that retail sales during the November-December holiday season will grow between 2.5% and 3.5% over 2023. A near-record 197 million people shopped during the holiday weekend from Thanksgiving through Cyber Monday, and 58% of holiday shoppers had started by early November.
“Consumers’ view of the economy has improved and they remain supportive of retail sales,” Kleinhenz said, adding that the University of Michigan’s consumer sentiment survey climbed for the fourth consecutive month to 71.8 in November, reaching its highest level since April. Core retail sales—based on Census Bureau data but excluding automobile dealers, gasoline stations, and restaurants—were up 5.4% unadjusted this October compared with October 2023.
GDP grew at an annual rate of 2.8% in the third quarter while personal consumption was up 3.5% year over year. Gross domestic income, which measures the income earned while producing the goods and services measured by GDP, lagged GDP for the second quarter in a row at 2.2%, which “added to the argument that the economy is slowing, but neither indicates that growth has halted.” NRF expects fourth-quarter GDP will be up by an annualized pace of 2%.
October saw only 12,000 new jobs created amid two hurricanes and multiple major labor strikes. Nonetheless, unemployment held steady at 4.1%, employment was up by 104,000 jobs on a three-month average, and consumer spending “currently remains on solid footing,” Kleinhenz said. Disposable income was up 5.1% year over year in October and employee compensation, a key measure of wages and salaries, was up 5.7%. Consumption was up 5.4% even as the personal saving rate increased to 4.4%.
Year-over-year inflation as measured by the Federal Reserve’s preferred Personal Consumption Expenditures Price Index rose to 2.3% in October from 2.1% in September but has been on a downward trend and is close to the Fed’s target of 2%.