Holiday shopping is underway as inflation, import-tariff pressures and the longest government shutdown in history have increased uncertainty for retailers and consumers.
Despite these challenges, the National Retail Federation issued a surprisingly rosy forecast for the season.
The group, which lobbies on behalf of retailers, said on Thursday it expected holiday sales to rise between 3.7 percent and 4.2 percent over last year. The federation also predicted spending would reach as much as $1.02 trillion, compared with $976.1 billion last year.
The group defines the holiday season as the period from Nov. 1 to Dec. 31 and excludes spending at auto dealers, gas stations and restaurants.
“Somehow every year, Santa Claus always comes, and I think that really captures the way the holiday season goes,” said Matthew Shay, president and chief executive of the National Retail Federation, on a call with reporters. “People save for it, they plan for it, they prioritize it. And we think that that’s going to happen again this year.”
Deloitte also said it expected holiday retail sales to top $1 trillion. The company reported in its annual holiday forecast in September that it projected holiday sales would total about $1.6 trillion during the November to January time frame.
The N.R.F. said consumers would likely spend, on average, about $890 per person this year on gifts, food, decorations and other seasonal items, slightly less than last year. The figure is not adjusted for inflation.
The retail federation acknowledged consumers were more cautious and price sensitive than in years past. They are trading down, and “trying to find value wherever they can find it,” Mr. Shay said.
While he said that it’s been difficult to make forecasts in the current economic environment, he defended the group’s outlook. “We think we have good clarity on the holiday season,” he said. “Nevertheless, we know that forecasting is increasingly challenging in this environment.”
Still, holiday expectations at some major retailers are mixed. Walmart’s chief executive, Doug McMillon, offered an upbeat outlook in August, stating the company was “expecting to have a good holiday season.” The retailer raised its full-year sales forecast.
Target’s chief commercial officer, Rick Gomez, said on an earnings call in August that the company was “planning cautiously for the back half of the year, given continued uncertainty and volatility.”
Kohl’s and Academy Sports and Outdoors noted that consumers were trading down or pulling back on spending. Analysts suggest off-price retailers like TJX Companies, Burlington Stores and Ross Stores are well positioned for a strong holiday season, as their value proposition attracts budget-conscious shoppers who are trading higher priced goods for cheaper ones, according to the analytics firm Placer.ai.
Even as inflation has come off its 2022 highs, prices for essentials like food and household goods remain elevated. The cooling labor market, recent layoffs in some industries and uncertainty over the direction of interest rates, as Federal Reserve officials remain split over additional cuts, could make shoppers more price conscious. According to a September report from PwC, around 84 percent of consumers expect to cut back on general spending for the next four months.
The government shutdown, which has left federal employees without paychecks and changes to Supplemental Nutrition Assistance Program benefits, which affect millions of lower-income households, could make holiday spending uneven across income groups, economists said.
Analysts also noted a divide between higher- and lower-income consumers. Lower-income shoppers are prioritizing big-box retailers and dollar stores and starting shopping earlier to spread out expenses, while higher earners continue to spend more freely, according to a report by Bank of America.
Executives at Weyco Group, which distributes moderately priced footwear lines, said its brands that appeal to high-income customers (like Florsheim) are performing strongly, while those targeting value customers (like Stacy Adams and Nunn Bush) are seeing a “bit of that drag.”
Following a pattern that began during the pandemic, stores began rolling out Christmas merchandise before Halloween, hoping to capture early demand and smooth out supply chain issues. Consumers are starting their shopping earlier to find the best deals and avoid potential price increases from tariffs.
But more shoppers are holding off on holiday buying until Black Friday weekend. Around 183.4 million people said they planned to shop in-store and online from Thanksgiving Day through Cyber Monday this year, slightly up from 182 million in 2023, according an annual survey by the N.R.F. and Prosper Insights & Analytics.
“We know that the consumer is highly promotional,” said Mark Mathews, chief economist of the N.R.F. “We expect them to continue to prioritize spending on loved ones, spending on families, and if that costs more, then they’re going to make savings in other areas of the economy.”
Kailyn Rhone is a Times business reporter and the 2025 David Carr fellow.
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