Deloitte Sees Slowdown In Holiday Sales Growth As Inflation Grinch Hurts Households

Deloitte Sees Slowdown In Holiday Sales Growth As Inflation Grinch Hurts Households

Real wage growth has stayed deeply negative for more than a year, and consumer confidence is extremely low amid persistent high inflation that is wrecking household finances. The souring macro backdrop has also wiped out personal savings and racked up credit card debt as households struggle for survival amid soaring cost of living. 

So what does this all mean for the upcoming holiday season in terms of retail sales? 

To answer that question, Deloitte’s US economic forecaster Daniel Bachman explains retail sales are projected to slow from November through January. 

Retail sales are likely to be further affected by declining demand for durable consumer goods, which had been the centerpiece of pandemic spending,” Bachman said in a report. 

He “anticipated more spending on consumer services, such as restaurants, as the effects of the pandemic continue to wane.”

Deloitte expects retail sales for November, December, and January to be 4% to 6% higher than the $1.39 trillion retail sales for the same period in 2021. 

This compares to a 15.1% jump last year versus the same period in 2020, fueled by pent-up demand and stimmy checks, which caused consumers to spend like there was no tomorrow. There’s a noticeable slowdown in this year’s estimates as they’re more in line with pre-pandemic trends. 

Bachman said the sharp pullback from last year “reflects the slowdown in the economy.” 

Deloitte noted high inflation would push more consumers online in search of deals. The consulting firm forecasts e-commerce sales for the holiday season could be up 13% to 14% from 2021’s $231 billion — that’s a quicker growth rate than last year’s 8.4%.

There’s no question that this year’s shopping season will be very challenging for retailers as consumers have changed spending behaviors from durable goods to experiences. 

The latest evidence of this was a warning from Sweden’s Electrolux AB, the world’s second-largest home appliances manufacturer, which said demand for home appliances across the US has plunged.

The good news for consumers is that retailers are stuck with a massive inventory glut of consumer goods. This suggests retailers will be bringing back holiday promotions more than ever to liquidate the excess — this will be bad news for company earnings.

Inflation could be the Grinch that stole Christmas as households cut back on durable goods spending amid the ongoing inflationary environment. 

Tyler Durden
Fri, 09/16/2022 – 17:20

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