The National Retail Federation still sees steady sales growth for the winter holiday season — despite recent economic indicators that paint a different picture, NRF Chief Economist Jack Kleinhenz said Thursday.“The economic data calendar was quite busy at the end October but while there were contradictions and mixed signals, we continue to believe the U.S. economy remains in a good place,” Kleinhenz said in the November issue of NRF’s Monthly Economic Review. “Most importantly, the new data doesn’t change our 2024 holiday forecast or retail sales projections for the year.”In mid-October, NRF forecast retail sales for the November-December holiday season to increase between 2.5% and 3.5% over 2023 to a total of $979.5 billion to $989 billion, saying the economy “remains fundamentally healthy and continues to maintain its momentum.”But in early November, government data showed the economy had gained only 12,000 jobs during October, and the annual pace of GDP growth had slowed to 2.8% in Q3 from 3% in Q2. But according to Kleinhenz, the drop in job numbers was caused by the temporary impact of Hurricanes Helene and Milton, as well as major labor union strikes.
Additionally, GDP growth was still “surprisingly strong,” continuing a 10-quarter string of “solid” increases despite inflation and high interest rates.
The Personal Consumption Expenditures Price Index — the Federal Reserve’s preferred inflation gauge — fell to a year-over-year increase of 2.1% in September, a tick above the Fed’s 2% target and the lowest since February 2021. At this point, NRF says, inflation is being driven almost entirely by services rather than goods.
It’s too soon to predict the impact of this week’s election results on the economy for the remainder of the year, Kleinhenz said.
“Putting all these considerations together, this holiday season looks very good,” Kleinhenz said. “Households are starting the season in decent financial shape and are managing the constraints of their paychecks, with growth in wages and salaries still supportive of a steady pace of spending. The economy remains on solid footing and is growing faster than many expected.”
With household balance sheets bolstered by a strong stock market and rising home values along with income, the outlook remains positive overall.
“I am optimistic about the pace of economic activity in the final quarter of the year,” Kleinhenz said. “Given third-quarter spending performance and comprehensive upward revisions in late September for income, spending and the savings rate, I have increased confidence in the economy’s strength and the near-term outlook.”
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