Holiday Spending Economic Predictions

Christmas tree ornaments on a table with money and a calculator

It is the best of times. It is the worst of times. It is the tale of two economies.

The National Retail Federation expects holiday spending to reach record levels during November and December and will be between $957.3 billion and $966.6 billion—3 3% to 4% over 2022.

But the news is not that good for brick-and-mortar stores. Online shopping has been one of the most significant shifts in consumer behavior since the COVID-19 pandemic. Non-in-store sales, which are included in the total, are expected to increase between 7% and 9% to a total of between $273.7 billion and $278.8 billion. That figure is up from $255.8 billion last year.

However, despite the online shopping trend, hiring between 345,000 and 450,000 seasonal workers is expected to align with the 391,000 hired in 2022.

NRF’s latest holiday survey conducted by Prosper Insights & Analytics, which is separate from the holiday sales forecast, shows 43% of Christmas gift shoppers planned to start making purchases before November. The survey also found consumers plan to spend $875 on core items, including gifts, decorations, food, and other holiday-related purchases this year.

“It is not surprising to see holiday sales growth returning to pre-pandemic levels,” NRF President and CEO Matthew Shay said. “Overall household finances remain in good shape and will continue to support the consumer’s ability to spend.”

This year’s optimism is based on the strength of the job market. According to the Bureau of Labor Statistics, wages and salaries increased by 1.2%, and benefit costs increased by 0.9% from June 2023. Compensation costs for civilian workers increased 4.3% for the 12 months ending in September 2023.

Part of the reason for increased consumer spending is the inflationary pressures that are driving up the prices of goods. An ICSC Holiday Intentions Survey noted that 42% of consumers plan to spend more this year than last.

What are people buying?

Gift cards remain the most popular category for purchases – an item on the shopping list of 63% of respondents – followed by apparel and footwear (56%) and toys and games (49%). Forty-five percent of consumers plan to purchase food, such as pre-packaged baskets and alcohol, while electronics and experiential purchases were cited by 41% and 22% of respondents, respectively.

Nearly 2 out of 3 people said sales and promotions are even more important to them this holiday season than the last one. And nearly 40% said they are cutting back in other areas to cover the cost of holiday items, such as trimming back what they buy for themselves or including fewer people on the gift-giving list.

According to research conducted by coupon site, the top items most in demand this holiday are the Nintendo Switch console, Apple iPad, Sony PlayStation 5, and Xbox Series X.

Paying the Holiday Bill.

The American consumer has defied the economic “doom and gloom” predictions and continues shelling out cash, fueled by post-COVID revenge spending and a hunger for experiences, such as tickets to Taylor Swift concerts. 

However, shoppers making their holiday purchases on credit will do so at a time when consumers are taking on more debt — and face bigger risks from carrying a balance.

After the Federal Reserve’s string of rate hikes, the cost of borrowing has climbed as credit card delinquencies (2.7% in 2023) have ticked up from 1.5% in 2021—though the metric remains below the high (6.7%) of the Great Recession.

According to the U.S. Federal Reserve Board, average interest rates on U.S. credit cards hovered at about 21% for the most recently reported quarter, compared with about 16% in the year-ago period. For retailer-issued cards, the average interest rate is nearly 30%, a record high, according to data from Bankrate.

However, student debt, auto loans, and mortgages have all become more significant burdens in this high-interest-rate environment.

Economic Predictions

Credit card delinquencies, not debt, are a better measure of consumer health. Inflation has lifted total spending, but shoppers have also felt more comfortable purchasing with higher wages and stable jobs. Those factors contributed to credit card debt hitting a new high of over $1 trillion for the first time earlier this year, according to the Federal Reserve Bank of New York.

“It’s the labor market, the labor market, the labor market,” said Aditya Bhave, senior U.S. economist for Bank of America. “That’s by far the most important thing when it comes to consumer spending.”

Bhave added that a solid labor market makes him feel generally optimistic about the holiday outlook and the odds of a “soft landing,” an economic slowdown that tames inflation but does not cause a recession.

Your Business

Continued predictions of a soft landing are particularly good for individuals and small businesses. Keeping your debt low and maintaining a good cash reserve is the key to avoiding the current inflation.

At Business Finance Corporation (BFC), we help businesses with cash deficits by advancing money on earned accounts receivables. To learn how we can help your business, call 702-947-3800 or go to

Your Partner in Success,

David Cabral