The largest retail trade group in the United States said last month that it expects consumers to spend more during the upcoming holiday shopping season but the growth in sales to be slower than last year due to concerns over persistent inflation and prices.
A new holiday spending survey is predicting that Minnesota residents are on track to spend 15% more this holiday season. Matt Marsh with Deloitte tells WCCO Radio's Vineeta Sawkar that the average Minnesota consumer expect to spend about $1,700 and that same number is up nationally 8% since 2023.
"Gifting experiences and holiday gatherings essentially," Marsh explained. "So stuff around the holidays and all three categories are going up. Experiences continues to go up, especially with the younger generations. They really crave experiences."
Marsh says consumers appear to be getting used to higher prices, but he shared that the survey shows increased expectations the economy to better as a whole in 2025.
"Consumers are sort of used to, I hate to say it that way, they're used to inflation so they're expecting higher prices," says Marsh. "That's driving part of it and a perception that the economy is going to be better in 2025. So that came out through our survey as well."
Retail executives surveyed echoed consumer optimism, with 80% expecting sales growth this holiday season aided by anticipated traffic growth in both in-store and online channels. However, 78% felt that earlier promotions are pulling sales forward, emphasizing the need for retailers to have the right products and prices early in the season.
The National Retail Federation said its 2024 forecast indicates that shoppers will make $979.5 billion to $989 billion worth of purchases in November and December, which would represent a 2.5%-3.5% increase over the same two-month period a year ago.
However, the $955.6 billion spent during the 2023 holiday shopping season was 3.9% more than in 2022.
This year’s predicted pace is consistent with the average increase of 3.6% from 2010 to 2019. During the coronavirus pandemic, Americans ramped up their spending. Holiday season sales rose 9% in 2020 from the year before, and they soared 12.4% in 2021, according to the National Retail Federation.
“Interest rates are still a little higher than they were in recent memory,” National Retail Federation CEO and President Matt Shay said during a call with reporters. “Consumers do have those interest rates and the lingering inflation on their minds. So we expect that consumers will continue to be more price-conscious and pragmatic in their spending decisions.”
The retail federation issued its look-ahead as the data shows U.S. consumers continuing to spend, powered by sturdy hiring, low unemployment and healthy household finances. Moreover, gas prices are coming down, leaving a little extra money for shoppers to spend on gifts. The national average price for a gallon of unleaded gasoline was $3.2 on Tuesday; a year ago, it was $3.60, according to auto club AAA.
With Thanksgiving falling on Nov. 28, there also will be six fewer days between the holiday and Christmas Day compared to last year. Other factors that could hurt holiday sales: the economic impact of hurricanes Helene and Milton, NRF officials said.
The Associated Press contributed to this story.