US holiday sales set for slowest year since 2018 as consumers turn frugal, report says

Sept 13 (Reuters) – U.S. holiday sales are at their lowest on record as lower household savings and economic concerns prompt consumers to spend wisely, according to a report released on Wednesday. It is estimated to increase at the slowest pace per year.

Sales across brick-and-mortar and online channels are expected to increase 3.5% to 4.6% from November to January, totaling $1.54 trillion to $1.56 trillion, according to Deloitte.

Deloitte said this compares with a 7.6% rise in 2022, when high inflation drove up the prices of everything from Christmas cardigans and toys to household appliances.

Retail giant Walmart (WMT.N) said last month that consumers had reason to be cautious in the second half of the year due to pressures from the reopening of student loans, rising gas prices again and high interest rates. The company said these factors could weigh on profit margins.

Other retailers’ earnings reports for August also dampened hopes for a strong year-end sales season, with major department store Macy’s (Minnesota) warning of curbs on consumer spending.

Pandemic-era savings are also rapidly dwindling. Excess savings in the U.S. fell to about $500 billion from about $2.1 trillion in August 2021, according to estimates from the San Francisco Fed. The resumption of student loan payments for millions of Americans on October 1 is expected to further strain the budget.

Deloitte’s estimates are based on a forecast that inflation will be 3.6% this year, up from 7.1% last year.

But all is not doom and gloom for the holiday retail industry, with online shopping expected to be a bright spot this season, with growth of 10.3% to 12.8%, according to Deloitte, outpacing the trends of the past two years. It is said that it exceeds that.

U.S. retail sales also had a strong summer, rising by a better-than-expected 0.7% in July due to rising incomes and increased use of credit cards, according to the U.S. Department of Commerce.

However, a slowing job market could limit holiday spending, said Daniel Bachmann, U.S. economic forecaster at Deloitte.

Back-to-school trends have driven the direction of the holiday season for 23 of the past 29 years, DA Davidson analyst Michael Baker told Reuters, adding that Walmart Chief Executive Doug McMillon ( CEO) said at a press conference on Tuesday that the year-end sales season was “pretty good” due to demand for back-to-school products in July.

Companies such as Target (TGT.N) and American Eagle Outfitters (AEO.N) also said shoppers snapped up back-to-school items.

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