Holiday sales to grow slowest since 2018; inflation to eat into consumer savings

US holiday sales are forecast to grow at their slowest pace since 2018, a new study says, amid concerns that persistent inflation will eat into consumer savings.

Deloitte’s annual holiday retail sales forecast predicts that sales will increase by 2.3% to 3.3% between November and January, totaling $1.6 trillion.

That would be a far cry from last year’s performance, when retail sales rose 4.3% during the same period to a total of $1.5 trillion, according to data from the U.S. Census Bureau.

“Rising credit card debt and the likelihood that many consumers have exhausted their pandemic-era savings will likely weigh on sales growth this season compared with last,” Deloitte Insights economist Akrur Barua said in a statement.

Forecasts for the upcoming holiday season are in line with the 3.1% sales growth recorded in 2018.

E-commerce sales are also likely to be lower than last year, though they “will remain strong as consumers continue to use online offerings to maximize their spending,” Michael Jeschke, leader of Deloitte’s retail and consumer products practice, said in a statement.

Deloitte forecasts online sales will grow 7% to 9% this holiday season to a total of $294 billion, down from the 10.1% increase last year of $270 billion.

According to Reuters, store sales are forecast to rise 1.3% to 2.1% to reach a total of $1.3 trillion, down from a 3.1% increase to just under $1.3 trillion last year.

Holiday sales typically account for more than half of U.S. retailers’ annual revenues.

Retailers are already facing the added challenge of a shortened holiday shopping season this year.

With just 27 days between Thanksgiving and Christmas, retailers are forced to offer discounts earlier in the season.

If consumers were to pull back on holiday shopping due to a lack of savings, it would hit businesses hard, and all consumers’ savings would decline significantly.

The U.S. personal savings rate fell to 3.4% in June from 3.5% in May, according to the U.S. Bureau of Economic Analysis — making June the lowest monthly rate in 2022.

The personal saving rate fell again to 2.9% in July, according to the BEA.

Therefore, we can expect consumers to start looking for offers earlier, during the holiday season.

Cash-strapped shoppers have already changed their shopping habits, looking for cheaper meals at fast-food restaurants, cheaper groceries at big box stores and cheap goods at fast-fashion retailers.

With postal wires