American consumers are expected to spend up to $859 billion on holiday shopping this season, possibly shattering previous records.
The forecast is a continuation of strong consumer demand since the second half of last year which is exacerbating port congestion and other supply chain disruptions as a record number of containerized imports pour into the nation’s ports.
The forecast by the National Retail Federation (NRF) projects holiday sales during November and December to grow between 8.5 percent and 10.5 percent, compared to 2020, to between $843.4 billion and $859 billion. The numbers compare to the previous high of $777.3 set last year despite the pandemic.
“There is considerable momentum heading into the holiday shopping season,” NRF President and CEO Matthew Shay said. “Consumers are in a very favorable position going into the last few months of the year as income is rising and household balance sheets have never been stronger. Retailers are making significant investments in their supply chains and spending heavily to ensure they have products on their shelves to meet this time of exceptional consumer demand.”
Online and other “non-store” sales are expected to increase between 11 percent and 15 percent, to a total of between $218.3 billion and $226.2 billion, driven by online purchases. That number is up from $196.7 billion in 2020.
Last year saw extraordinary growth in digital channels as consumers turned to online shopping to meet their holiday needs during the pandemic. This year, however, the NRF said that while e-commerce will remain important, households are also expected to shift back to in-store shopping for a more traditional holiday experience.
“The outlook for the holiday season looks very bright,” NRF Chief Economist Jack Kleinhenz said. “The unusual and beneficial position we find ourselves in is that households have increased spending vigorously throughout most of 2021 and remain with plenty of holiday purchasing power.”
One factor that is likely to steer holiday sales is whether or not disruptions in the supply chain will lead to empty store shelves.
“Pandemic-related supply chain disruptions have caused shortages of merchandise and most of this year’s inflationary pressure,” Kleinhenz said. “With the prospect of consumers seeking to shop early, inventories may be pulled down sooner and shortages may develop in the later weeks of the shopping season. However, if retailers can keep merchandise on the shelves and merchandise arrives before Christmas, it could be a stellar holiday sales season.”
While it appears new COVID-19 infections and hospitalizations are down, a variant surge could also potentially sidetrack the current trajectory of spending, the NRF said. Weather could also be a factor as forecasters call for a high likelihood of a La Niña pattern that has historically correlated with stronger retail sales.
Still, Kleinhenz said strong household fundamentals provide optimism amid the uncertainty, with income growing and household wealth at a record high.
Just last week, the world’s top shipping company Maersk said the ongoing supply chain situation in the United States is actually a byproduct of growth and can be attributed to record consumer buying.