Data from the National Retail Federation (NRF) indicates that holiday sales in the United States for 2023 are projected to experience the slowest growth in the past five years. The ongoing challenge of inflation has led Americans to be more cautious with their spending during the holiday season.

The NRF, a leading retail industry group, estimates that holiday sales, which include e-commerce and non-store sales, will increase by 3% to 4%, reaching a total of $957.3 billion to $966.6 billion during November and December. This forecast is notably lower than the 5.4% growth observed last year and the substantial 12.7% increase seen in 2021.

NRF President and CEO Matthew Shay noted that despite economic uncertainty and household challenges, consumers have displayed strength and resilience. However, there has been a noticeable shift in how consumers allocate their spending, emphasizing the need for prudent financial decisions.

High prices for fuel and food, coupled with student loan repayments, have strained household budgets. As a result, consumers are reevaluating their holiday spending habits and are even cutting back on some grocery purchases.

The NRF’s less optimistic outlook for the holiday season aligns with a similar forecast from Deloitte, which also anticipates slower holiday sales growth as consumers prioritize essential daily purchases.

The NRF predicts that online and other non-store sales will fare better, with an expected increase ranging between 7% and 9%, totaling $273.7 billion to $278.8 billion.

In contrast to the cautious spending attitude among consumers, major retailers like Walmart and Macy’s have reported fewer in-store visits, despite launching early holiday promotions. Retail analytics firm Sensormatic Solutions predicts a potential drop in foot traffic of up to 3.5% year-on-year for this holiday season, with warmer weather potentially contributing to the decrease in in-store visits.

Comparing this year to 2022, Sensormatic data reveals that foot traffic remained flat, following a remarkable 17.2% surge in 2021 when shoppers rushed to stores after the relaxation of COVID-19 restrictions.

Furthermore, data from Placer.ai indicates a decline in store traffic during the first two weeks of October, even with early holiday discounts offered by retailers like Target, Walmart, and Kohl’s. These promotions, such as Target’s “Circle Week” and Walmart’s “Holiday Kickoff,” failed to drive increased in-store visits.