Holiday Spending Expected to Hit Record High This Season

Holiday Spending Expected to Hit Record High This Season

Increases in household income may be the main cause for a record-shattering increase in spending
woman holding a stack of holiday gifts

As spending behaviors continue to shift in the wake of the pandemic, holiday shopping is expected to be on the rise. In fact, consumers could break holiday spending records this year.

An October forecast from the National Retail Federation (NRF), a major retail trade association, predicts the " highest holiday retail sales on record." This increase will likely be due to a combination of increasing incomes, record-high household wealth and weather patterns that are historically tied to an increase in retail spending.

Holiday spending may increase by more than 10% from 2020

While holiday sales generally increase year-over-year, the NRF forecast predicts a record-breaking increase from 2020 to 2021. Here's what the predictions say:

  • Holiday sales are expected to increase by 8.5% to 10.5% from $777.3 billion in 2020
  • Total sales for 2021 are expected to reach between $843.4 billion and $859 billion
  • Online and other non-store sales could increase up to 15%, totaling as much as $226.2 billion
  • The previous record for the largest increase was 8.2%, between 2019 and 2020

Meanwhile, in another NRF survey, consumers provided contradictory information. Survey participants said they planned to spend $997.73 on gifts and holiday items this year, on par with their 2020 shopping plans ($997.79). (Note that the NRF’s findings don’t include spending before November or spending at automobile dealerships, gas stations and restaurants.)

COVID-19 could alter the forecast

Online holiday shopping grew significantly in 2020 and is expected to remain high this year. However, the NRF predicts that in the 2021 holiday season, consumers will likely make a slight shift back to in-person shopping. Like the trade group’s other predictions, this one assumes there isn’t, nor will there be, a surge in COVID-19 or variant infections.

The NRF defines the holidays as the months of November and December; however, a large number of consumers said they’d begin shopping earlier this year, possibly due to concerns over the supply chain. Between early shopping and supply chain issues, retailers may begin running out of inventory before the holiday season ends.

Methodology: The NRF's holiday forecast is based on economic modeling that considers a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit, previous retail sales and weather. Its consumer holiday spending survey had 7,921 participants and was conducted between Oct. 1 and Oct. 10, 2021.

The NRF defines the holiday season as Nov. 1 through Dec. 31.