2024 Holiday Sales outlook: Scary Christmas and a Happy New Year?

Summary

As the leaves start to change color, retailers move out the back-to-school merchandise as they deck the aisles with everything from 12-foot evergreens to human-size nutcrackers earlier and earlier each year. While our official tally of holiday sales does not kick off until November 1, anyone who has been in a home improvement store recently is reminded the holidays are fast approaching. In a year when sustained consumer spending propelled growth and helped the economy skirt recession, we're actually calling for a fairly modest holiday sales season to close out 2024.

Back by popular demand, some themes made the holiday menu again this year—holiday shopping continues to get pulled forward with less happening during the traditional period spanning from Black Friday to Christmas, still-high prices and less support propping up purchasing power means continued competition for consumer dollars, and online retailers continue to be the king of the dance when it comes to commanding the most holiday-sales dollars.

Yet, there is also a scent of, dare-we-say, “normal” in the air this year. Consumers' purchasing power has once again become dependent on income growth, as unique pandemic-era spending sources have faded. Despite consumer momentum helping sustain the economic expansion this year, through September the retailers included in our holiday sales metric have seen the slowest year-to-date sales growth in seven years. Momentum isn't a huge lift factor this year, as it has been in the years since the pandemic.

Both traditional brick-and-mortar and online retailers are growing flexible in catering to the early and late shopper, but with competition for consumers' dollars as fierce as ever, households are on the hunt for value this year and will likely spend less on traditional retail than in years past.

All told, we forecast holiday sales to rise 'just' 3.3% in November and December compared to the same period last year. If realized, that means we expect the 2024 holiday sales season to not only be weaker than last year's sales season, but also less robust than the long-run average of 4.3%.

While we're expecting a more modest end to the year for retailers, the fact is consumers are spending more throughout the year instead of waiting for Christmas. On that basis a soft finish to retail spending in 2024 need not set off major concerns about the sustainability of spending in 2025.

Download The Full Special Commentary