Nov 2, 2023 - Economy

Holiday spending could see boost from lower heating costs

Data: U.S. Census and National Retail Federation; Chart: Axios Visuals
Data: U.S. Census and National Retail Federation; Chart: Axios Visuals

Many American households may get a boost to their holiday budgets thanks to an expected dip in heating costs. That's according to Jack Kleinhenz, chief economist for the National Retail Federation, who spoke to reporters Thursday morning.

Driving the news: Winter heating prices for U.S. homes are expected to remain relatively flat or decrease, the U.S. Energy Information Administration reported early last month.

  • Cost savings, if any, will be dependent on a home's main heating fuel and will vary by region and actual temperatures.
  • "Because we expect natural gas prices will be lower than last year, the 46% of U.S. households that use natural gas as their main heating fuel will likely spend less on heating this winter compared with last winter," the EIA report stated.

By the numbers: At the base case, the EIA predicts a decline in costs nationally of 21% for natural gas users, a 1% decline for electricity users, and a 3% decline for propane.

  • Heating oil customers on the other hand are expected to see an 8% increase.

What they're saying: "I'm using [EIA] estimations as an indication of maybe a little bit more freedom in the average budget," said Kleinhenz.

  • In general, 2-3% of household budgets go toward heating costs and "that's a considerable amount of money for especially lower income cohorts,” he said.

The big picture: Any additional savings from lower costs could go toward holiday online and offline retail spending, which the NRF projects could grow 3-4% over last year to between $957.3 billion and $966.6 billion in the November and December period.

  • That expected rate of growth is slower than the previous three years, but is in line with the 3.6% average holiday sales growth from 2010 to 2019.
  • The calculation does not include spending at auto dealers, gas stations or restaurants.

What we're watching: U.S. retail sales have grown year-over-year every month since May of 2020.

  • Consumers are expected to continue to spend, but at a slower pace as inflation and geopolitical tensions weigh on confidence.
  • But "as long as the job market is as strong as it is, [consumer] actions are going to continue to power the economy," Matthew Shay, CEO of NRF, said Thursday.
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