Holiday spending is on the rise despite inflationary pressures, according to a forecast from the National Retail Federation (NRF) which finds that consumers continue to increase their spending as the holidays approach. High inflation and rising interest rates were expected to dampen holiday spending. However, according to the NRF, spending rose by 0.6 percent in September, indicating that demand continues to rise. 

“There are many factors impacting our holiday forecast, but business conditions are generally positive as consumer fundamentals continue to support economic activity,” said NRF chief economist Jack Kleinhenz. “Despite record levels of inflation, rising interest rates and low levels of confidence, consumers have been steadfast in their spending and remain in the driver’s seat. The latest figures show the economy is holding together better than may have been expected.”

Kleinhenz made these remarks following the NRF Monthly Economic Review, which revealed that gross domestic product rose by 2.6 percent in the third quarter. Kleinhenz believes this is “a healthy increase that should override any remaining fears that the economy is in a recession.”

Holiday retail sales during November and December will grow between 6 percent and 8 percent over 2021 to between $942.6 billion to 960.4 billion. These figures are well above the 10-year average of just 4.9 percent. 

“While consumers are feeling the pressure of inflation and higher prices, and while there is continued stratification with consumer spending and behavior among households at different income levels, consumers remain resilient and continue to engage in commerce,” NRF president and CEO Matthew Shay said. “In the face of these challenges, many households will supplement spending with savings and credit to provide a cushion and result in a positive holiday season.”

Job growth continues to hold steady, with wages and salaries up 5 percent year over year. Economists at the Federal Reserve say consumers have approximately $1.7 trillion in savings that was built up during the pandemic. Credit balances remain low as consumers have more disposable income. 

The NRF expects that between 450,000 and 600,000 seasonal workers will be hired this year, down from 670,000 last year. However, many of last year's temporary hires became permanent employees, impacting these figures slightly.