U.S. Retail Sales Forecast for Holiday Season

(Reuters) – U.S. retail sales are expected to rise 3.2% in the holiday season as companies look to deals to attract thrifty shoppers during a shorter-than-usual shopping window this year, according to a Mastercard (NYSE:MA) forecast released on Thursday.

In comparison, retail sales rose 3.1% between Nov. 1 and Dec. 24, 2023, as reported by the Mastercard Economics Institute. Mastercard SpendingPulse measures in-store and online retail sales across all payment forms, excluding automotive sales.

Why It’s Important

Consumers are predicted to be selective in their spending this year, prompting retailers such as Walmart (NYSE:WMT), Target, Amazon.com (NASDAQ:AMZN), and China’s Shein and PDD Holdings-owned Temu to announce aggressive deals.

The report states, “Inflation continues to cool and consumers continue to expect – and demand – promotions and discounts. Discounts and promotions are no longer just ‘nice to have’; they are essential.”

With only 27 days between Thanksgiving and Christmas, this shorter shopping window may encourage retailers to launch promotions earlier in the season. A Deloitte forecast indicates that U.S. holiday sales will grow at their slowest pace in six years.

By The Numbers

• Online sales are projected to jump 7.1% during the holiday season from last year.
• Spending on big-ticket electronics such as televisions and laptops could increase by 6.7%, driven by lower borrowing costs, cheaper prices, and the replacement of older devices bought during the pandemic.

Earlier this week, Best Buy (NYSE:BBY) announced it would kick off its holiday promotion event for members at the month’s end.

Context

As the critical holiday season approaches, the Federal Reserve recently initiated an expected series of interest rate cuts, starting with a substantial 50 basis points reduction. This move aims to alleviate some financial pressure consumers have faced over the past 2.5 years amid high inflation.

Despite these challenges, consumer spending remains resilient, with unexpected retail sales growth in August driven by robust online purchases. Government data indicates that the labor market is likely to continue generating steady wage gains, bolstering consumer spending and the overall economy.