US Retail Sales Forecast for the Holiday Season: A Detailed Analysis

As the holiday season approaches, the retail sector is gearing up for a significant period of consumer spending. Deloitte, a leading professional-services group, has projected that US retail sales will rise by 2.3% to 3.3% year on year during this period. This growth is attributed to a strong job market and increasing disposable income among consumers.

Projected Revenue and Growth Rate
Deloitte predicts that revenues will total between $1.58 trillion and $1.59 trillion from November to January. However, the overall growth rate is expected to slow compared to last year’s 4.3% increase. This deceleration is largely due to the moderation of inflation and rising credit card debt.

Akrur Barua, an economist at Deloitte Insights, commented on the forecast, stating, “Although the pace of increase in holiday sales will be slower than last year, we expect that healthy growth in disposable personal income (DPI), combined with a steady labor market, will support a solid holiday sales season.” Barua also highlighted the dual impact of inflation on holiday sales. On one hand, declining inflation boosts consumers’ purchasing power, but on the other hand, it negatively affects the nominal rise in the dollar value of sales. Additionally, the increase in credit card debt and the depletion of pandemic-era savings are expected to weigh on sales growth this season compared to the previous one.

Impact of E-commerce


A significant portion of this year’s sales will be driven by increased online spending. Deloitte noted that e-commerce sales are expected to climb by 7% to 9% year on year, reaching between $289 billion and $294 billion. This trend reflects the growing consumer preference for online shopping, which has been accelerated by the pandemic.

Mastercard’s Perspective
Mastercard has also provided its forecast for the holiday season, predicting a 3.2% year-on-year increase in spending for the period from November 1 to December 24. The company observed a shift in consumer behavior, particularly among Millennials and Gen Zs, who are opting for new, popular brands that are less expensive than traditional ones. While the total outlay on these newer labels is set to grow by 9%, the average transaction value is expected to fall by 4%, from $121 to $116.

Consumer Trends and Retail Strategies
Michael Jeschke, a principal at Deloitte Consulting and leader for retail and consumer products, emphasized the importance of understanding consumer trends and adapting retail strategies accordingly. “Following a sharp rise in spending post-pandemic, this season’s retail sales are expected to moderately increase in line with trends over the past decade,” Jeschke said. He also noted that e-commerce sales will remain strong as consumers continue to take advantage of online deals to maximize their spending. Retailers who focus on building loyalty and trust with consumers could be well-positioned for success this holiday season.

Economic Factors Influencing Retail Sales
Several economic factors are influencing the retail sales forecast for this holiday season. The strong job market has led to increased disposable income, which is a key driver of consumer spending. However, the moderation of inflation is a double-edged sword. While it enhances consumers’ purchasing power, it also reduces the nominal growth in sales value. Rising credit card debt is another concern, as it may limit consumers’ ability to spend freely during the holiday season.

The Role of Disposable Personal Income
Disposable personal income (DPI) plays a crucial role in determining consumer spending patterns. Healthy growth in DPI, combined with a steady labor market, is expected to support a solid holiday sales season. Consumers with higher disposable income are more likely to spend on discretionary items, which boosts retail sales. However, the impact of rising credit card debt and the depletion of pandemic-era savings cannot be overlooked, as these factors may dampen consumer spending.

Inflation: A Headwind and a Tailwind


Inflation has a complex impact on retail sales. On one hand, declining inflation increases consumers’ purchasing power, allowing them to buy more goods and services. On the other hand, it negatively affects the nominal rise in the dollar value of sales. Retailers need to navigate this challenging environment by offering value to consumers while maintaining profitability.

The Shift to Online Shopping
The pandemic has accelerated the shift to online shopping, and this trend is expected to continue during the holiday season. E-commerce sales are projected to grow significantly, driven by consumers’ preference for the convenience and safety of online shopping. Retailers who invest in their online presence and offer attractive deals are likely to benefit from this trend.

Consumer Behavior and Brand Preferences
Consumer behavior is evolving, with Millennials and Gen Zs showing a preference for new, popular brands that are less expensive than traditional ones. This shift in brand preferences is expected to impact the average transaction value, which is projected to decline. Retailers need to understand these changing preferences and adapt their product offerings to meet the demands of younger consumers.

Strategies for Retail Success
To succeed in this competitive environment, retailers need to focus on building loyalty and trust with consumers. Offering personalized experiences, maintaining a strong online presence, and providing value through attractive deals are key strategies for success. Retailers who can effectively engage with consumers and meet their evolving needs are likely to thrive during the holiday season.

Conclusion
In conclusion, the US retail sector is poised for a moderate increase in sales this holiday season, driven by a strong job market and increasing disposable income. While the overall growth rate is expected to slow compared to last year, healthy growth in disposable personal income and a steady labor market will support a solid holiday sales season. The shift to online shopping and changing consumer preferences will play a significant role in shaping retail sales. Retailers who focus on building loyalty and trust with consumers, and who adapt their strategies to meet evolving consumer needs, are likely to succeed in this dynamic environment.