With inflation casting a long shadow over the economy, the resilience of the American consumer will be put to the test as holiday spending is projected to reach a whopping $989 billion in 2024. Figures from the National Retail Federation suggest that despite tighter budgets and a sense of financial strain, consumers are on track to outpace last year's expenditures during the bumper shopping months of November and December. Last year, retail sales for the same period amounted to $955.6 billion.
The trend defies negative consumer sentiment, which has been influenced by ongoing worries about the state of the economy and a presidential election. CBRE Econometric Advisors notes a return to historical spending averages, implying a normalization following the upsurges seen during the pandemic when spending on goods trumped that of services.
Concurrently, deep discounts and aggressive marketing strategies have been deployed even earlier than traditional Black Friday kickoffs due to the late Thanksgiving this year, prompting consumers to open their wallets in advance. According to analysis from Adobe Analytics, online spending in November witnessed an expansion of 9.6%, and households are reported to be leaning on credit and debt to maintain spending levels, raising concerns over a potential 'consumer bubble' in 2025.
Meghann Martindale, from Avison Young, highlighted the contrast between consumer sentiment and action, saying, "there are a lot of contradictory forces at play between consumer sentiment and what consumers are actually doing," as reported by BizJournals. Notably, a market research by Circana found that people are budgeting to spend, on average, a significant $771 for the holiday season, with parents shelling out even more for their kids.
Despite the surge in spending, the effect on retail real estate remains uncertain with experts noting the market for space is extraordinarily tight. Data from Colliers International indicates only 4.7% of retail space was available for lease U.S. wide at the end of the third quarter, 26% below peak availability seen during the pandemic. So while Q4 sales are crucial for retailers, the current market conditions mean that even a strong holiday season might not substantially affect retail real estate decisions for the coming year.
Holiday shoppers continue to favor traditional gifts and are increasingly indulging in self-gifting, especially with beauty products, footwear, and luggage, according to Circana. Despite financial concerns, this blend of practical and splurge purchases keeps cash registers ringing, showing that the spirit of giving is still strong.
