Retail spending expected to be impacted by upcoming elections and hurricane season

Inflation may have cooled, but retailers are still staring down a holiday season with plenty of uncertainty.

Several hard-to-predict factors will influence consumers’ spending, as they deck the halls and look for the perfect gifts. Volatile weather, election distraction and a deal-hunting mindset may shape the season. And fewer days between Thanksgiving and Christmas than last year will put shoppers on the clock.

Yet there’s reason for optimism for retailers: Shoppers are feeling more upbeat and plan to spend more compared with last holiday season, according to an annual survey by consulting firm Deloitte and a separate forecast by the National Retail Federation.

Holiday spending in November and December is expected to increase by 2.5% to 3.5% compared with 2023 and range between $979.5 billion and $989 billion, according to the National Retail Federation. That’s a more modest increase than the 3.9% year-over-year jump from the 2022 to 2023 holiday season, when spending totaled $955.6 billion. The NRF’s figure excludes automobile dealers, gasoline stations and restaurants.

Shoppers expect to spend an average of $1,778 on the holidays this year, 8% more than last holiday season, according to consulting firm Deloitte’s survey. The survey, which included about 4,000 consumers and was conducted in late August and early September, attributed that spending increase to a more favorable economic outlook, a perception among respondents that prices would be higher and more willingness to spend among higher-earning households with an annual income of between $100,000 and $199,000.

Low unemployment, a return to more typical inflation levels and a recent Federal Reserve interest rate cut are lifting consumers’ spirits, said Stephen Rogers, managing director of Deloitte’s Consumer Industry Center.

“People are still in a better frame of mind, despite the political chatter,” he said. “When they look at their bank account and think about what their financial situation is, they feel better.”

Weeks before trick-or-treating, shoppers got a taste of their first holiday deals.

Those early offers set the stage for a season when shoppers are expected to seek out more ways to stretch the budget after costs of living climbed for years.

Nearly 80% of shoppers surveyed by Deloitte said they would participate in deals events in October and November, up from 61% last year.

“Our deal seeking muscle has been really exercised the past two years and we are just going to continue to exercise it,” Rogers said.

NRF CEO Matt Shay echoed that prediction. On a call with reporters this week, he said the retail trade group expects a more promotional environment this holiday season, with deals across more brands and categories than a year ago.

Another potential challenge for retailers? Catering to customers who are more focused on decorations and experiences than gifts. Consumers plan to spend 16% more year over year on experiences, but spend 3% less on gifts compared with the year-ago holiday period, according to Deloitte’s survey. Non-gift purchases, including spending on decor and party apparel, is also expected to jump 9% year over year.

The firm’s survey found that spending in retail categories would remain relatively flat with an average of $1,043 in 2024 compared with $1,020 in 2023. Consumers across income groups reported value-seeking habits, including less self-gifting, more trading down to affordable retailers and more seeking out private labels or “dupes” of pricier items.

That shift could hurt retailers that sell goods, unless they come up with compelling ways to tie their merchandise to experiences, such as suggesting hiking gear, Rogers said.

For Home Depot, which sells a wide range of holiday decor including Santa-themed throw pillows and a giant animated reindeer for yards, the high demand for decor could be an opportunity. Yet the home improvement retailer said it’s prepared for consumers to seek value, too.

This holiday season, Home Depot bought more low-priced artificial Christmas trees, such as a prelit tree that sells for $49, said Lance Allen, senior merchant of decorative holiday for the home improvement retailer.

As Americans await results of the presidential election, will they also shop for the holidays?

That’s a question on the minds of retailers and consumer brands, including Walmart and SharkNinja, that are hoping shoppers will browse and buy…