Consumers are in good shape and expected to spend more this holiday season, according to the National Retail Federation. The trade group predicts total holiday sales to range between $727.9 billion to $730.7 billion, rising 3.8% to 4.2% from the year-ago period.
In a Thursday (Oct. 3) media call, the trade group said it is pleased with the forecast and is reasonably confident in the predictions which exclude automobile sales, gas stations and restaurants.
“The U.S. economy is continuing to grow and consumer spending is still the primary engine behind that growth,” NRF President and CEO Matthew Shay said. “Nonetheless, there has clearly been a slowdown brought on by considerable uncertainty around issues including trade, interest rates, global risk factors and political rhetoric. Consumers are in good financial shape and retailers expect a strong holiday season. However, confidence could be eroded by continued deterioration of these and other variables.”
He said the trade group looks at nearly two dozen metrics to come up with the forecast. Shay said political rhetorical in Washington, trade concerns and volatility in the financial markets could weigh on consumer sentiment should the trade war with China persist.
Shay said the growth expectation is above the five year average of 3.5% and also trending higher than last’s growth estimates which were weighed down from concerns of government shutdown, trade wars and rising interest rates. In 2018, holiday retail sales totaled $701.2 billion, an unusually small increase of 2.1%.
NRF expects online sales to grow between 11% and 14% over last year and Shay said this makes up about 20% of the overall sales numbers. He said online sales are growing, but more retailers are becoming agnostic to the shopping channel and not breaking out the online and in-store sales. Shay said e-commerce sales are expected to range between $162.6 billion and $166.9 billion this year, notable for sure.
The chief economist for the trade group, Jack Kleinhenz, said consumer fundamentals are strong and they do drive much of the economy.
“Consumer confidence overall is positive though it moves sideways at times. There are probably very few precedents for this uncertain macroeconomic environment,” Kleinhenz said. “There are many moving parts and lots of distractions that make predictions difficult. There is significant economic unease, but current economic data and the recent momentum of the economy show that we can expect a much stronger holiday season than last year. Job growth and higher wages mean there’s more money in families’ pockets, so we see both the willingness and ability to spend this holiday season.”
Shay said the impact of tariffs will largely be felt in 2020 as retailers have employed various strategies to hold back price increases for consumers this holiday season. He said some ordered product before the tariffs took effect, others have passed increases to their suppliers, and some will eat the cost increases while trying to spread the impact over multiple categories longer term.
Shaw said the effect of tariffs on holiday spending – either directly or through consumer confidence – remains to be seen. He said some holiday merchandise – including apparel, footwear and televisions – is subject to new tariffs that took effect Sept. 1. Other products will have tariffs applied on Dec. 15. By the end of the year, Shay said nearly everything imported from China will be subject to tariffs.
A recent NRF survey found 79% of consumers were concerned that tariffs will cause prices to rise and potentially affect their approach to shopping in the future. Shay said the trade group will conduct additional consumer surveys later this month to forecast the timeline and shopping intentions of American consumers.