Nov. 19, 2024

Wells Fargo is predicting a modest holiday shopping season this year.

Its annual holiday sales outlook, produced by the Economics Group of Wells Fargo Bank NA, is forecasting holiday sales to increase 3.3 percent in November and December compared with last year. That’s slower than last year’s 3.8 percent increase and below the long-run average of 4.3 percent.

“Despite broad spending continuing at a robust clip this year, the retailers we include in our holiday sales measure have seen sales rise at the slowest pace on a year-to-date basis through September in seven years, suggesting momentum is not on the side of sales this year,” the report said.

Households are now back to spending based on income, without pandemic-related stimulus, and competition for dollars “is as fierce as ever, with compounding price gains, high interest burdens and the continued desire for experiences over ‘stuff’ hampering how much households spend on traditional retail this season,” the report said.

While inflation has slowed, “prices remain high and continue to erode how much households can spend on gifts,” it continued, adding that households are spending more on health care services and activities like going out to eat.

“When everything costs more, there’s less to dedicate to gifts,” the report said.

“Retailers have been making the right moves in recent years to push sales earlier and earlier and to be nimble in the growing online retail environment.”

That’s key this year, with one fewer week between Thanksgiving and Christmas than usual.

“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,” the report added. “On that basis, a soft finish to retail spending in 2024 need not set off major concerns about the sustainability of spending in 2025.”