• by Sarah Mahoney , Yesterday

 
The National Retail Federation and Deloitte just unveiled their annual predictions for the coming holiday season, and on the surface, the news is good. With the NRF calling for a 4.2% gain and Deloitte expecting a 4% rise in per-household spending, retailers' dollar gains look healthy. But given the pace of inflation, especially in key gifting categories like electronics, few holiday budgets will go as far as they did last year. Mark Mathews, the NRF’s chief economist, anticipates “pressure on unit volumes and meaningful differences in spending power across households.”

But the topline numbers describe two very different Christmases. Households earning more than $200,000 plan to spend about five times as much as those earning under $50,000, according to Deloitte.

In a call detailing the forecast, NRF president Matthew Shay repeatedly referenced the “resilient consumer,” predicting people will keep prioritizing the holiday season even as rising food, gas, and healthcare costs squeeze discretionary budgets. The NRF is likely right: Even in dreadful economic conditions, families try hard to keep the holiday season bright.

But this year, “resilient” may well translate into “restrained.” Fresh data from the Pew Research Center says that overall, 70% of U.S. adults say they have cut back on spending for extras -- such as eating out, streaming services or other entertainment -- in the past year. It’s not just frills; 44% say they have had trouble paying a basic necessity in the last year, including medical care, daily transportation, food, rent or mortgage. Among lower-income people, that number rises to 71%.

NRF data shows retail sales have improved for the last 12 consecutive months. And while the holiday forecast shows a K-shaped holiday, lower-income families seem more positive about their spending plans than they were heading into last year’s holiday. Mathews said that willingness to spend “likely accounts for some of the greater strength we're seeing in retail sales.”

More affluent shoppers will drive much of this season’s sparkle, with the top 10% of spenders accounting for as much as 70% of total sales in some sectors, he added.

Deloitte expects average household spending to reach $1,654, up 4% year over year. Gen Z and millennials now represent 50% of holiday spending. But the consulting company is seeing some real behavioral shifts. Consumers, increasingly aware of higher costs, expect to spend 10% more on retail, at $988, but 4% less on holiday activities, at $666.

Deloitte also finds a growing divide: households earning more than $200,000 plan to spend $3,607 on average, about five times the $693 expected by those earning under $50,000.

Last week, ICSC, formerly the International Council of Shopping Centers, also released its holiday forecast, predicting holiday sales will rise by 4.3% to 4.9%, with total spending likely to top $1.7 trillion.

More than three-quarters -- 78% -- of consumers plan to spend the same or more than they did last year. But the ICSC data echoes the financial fragility that Pew reports. While 83% of consumers say they can keep up with essential expenses, 49% worry they can afford holiday gifts this year, and half say personal or household debt will affect their holiday spending. Almost half say they will borrow to cover purchases, and 47% anticipate holiday expenses will delay or reduce debt repayment, savings, or retirement contributions.