Modest 2023 holiday sales expectations

EY-Parthenon anticipates a moderate 3% rise in retail sales during the November and December 2023 holiday season, with risks leaning to the downside. While holiday sales will reach their highest level on record, at $979b in 2023, the 3% pace of growth would fall short of the 5.8% advance in 2022 and 13.2% post-pandemic rebound in 2021 (Figure 1).

While robust employment growth should support positive retail sector momentum, our conservative outlook for the holiday season is driven by increasingly cautious consumer spending influenced by a combination of challenging economic factors, including elevated inflation, higher interest rates and moderating income gains. 

Additional pressures from the restart of student loan payments on October 1, the depletion of excess savings, rising energy prices and more stringent credit conditions are expected to further hamper consumers’ purchasing capacity as we approach the holiday season.

While the expected 3% advance in holiday sales is not much lower than the 3.7% average annual gain from 2010 to 2019, much of this year’s rise in sales will derive from higher prices. Indeed, we anticipate inflation will still be hovering around 3% by year-end so that volume sales are likely to be relatively flat on a year-over-year basis.

Continuing with the post-pandemic trend, we foresee online sales representing a bigger share of holiday purchases around 19%–20% vs. 14% in 2019 and 18%–19% in 2022.

EY-Parthenon Chief Economist Gregory Daco commented that “while steady job growth should continue to support household incomes and modest consumer outlays growth, households’ spending power will be restrained by persistently elevated prices, the rising cost of credit, increased debt burdens and reduced savings buffers.”

Note: Our holiday sales forecast focuses on retail sales excluding auto dealers, gas stations and restaurants during November and December.

Figure 1: Year-over-year percent change in holiday retail sales
2001–23F