2019 holiday shopping

Between impeachment talk, recession worries, trade wars and Wall Street volatility, there’s plenty to distract consumers and deter holiday spending.

Nevertheless, the National Retail Federation is forecasting holiday sales to rise between 3.8 percent and 4.2 percent over 2018 to a total of between $727.9 billion and $730.7 billion in sales. Holiday sales during 2018 totaled $701.2 billion.

The numbers, which exclude automobile dealers, gas stations and restaurants, compare with an average holiday sales increase of 3.7 percent over the previous five years. The NRF defines the holiday season as extending from Nov. 1 to Dec. 31.

“The U.S. economy is continuing to grow and consumer spending is still the primary engine behind that growth,” NRF president and chief executive officer Matthew Shay said Thursday. “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.”

“There are probably very few precedents for this uncertain macroeconomic environment,” NRF chief economist Jack 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.”

NRF expects online and other non-store sales, which are included in the total, to increase between 11 and 14 percent to between $162.6 billion and $166.9 billion, up from $146.5 billion last year.

In a conference call, Shay said retail momentum continues amid the uncertainty out there and that holiday 2019 will overall be a strong season, with apparel, electronics, toys and gift cards “all going to show up as prominent categories.

“It’s a strong forecast,” Shay said, compared to the low 2 percent range during last year’s season, which was affected by the government shutdown, the Federal Reserve raising interest rates, and the initial stages of the debate on tariffs.

In producing its forecast, the NRF examines two dozen different variables including employment, housing, credit, consumer confidence, average hourly earnings and previous retail sales.

“The fundamentals underlying the economy are strong,” Shay said, citing low unemployment, growing wages and overall positive consumer confidence.

However, last year, GDP was up near 3 percent, while this year it’s somewhere in the lower 2 percent range, Shay said. “The economy is not growing quite as fast as it did last year but certainly it is still growing. Consumer spending is still the primary engine behind that growth.”

Many retailers last month did cite positive back-to-school sales at the beginning of the season, which provides some sense of where the consumer mind-set is, but isn’t necessarily a clear forecaster of what lies ahead for holiday spending.

What should help the holiday season is the administration’s delay of a broad range of certain tariffs. Some holiday merchandise (including apparel, footwear and televisions) were subject to new tariffs that took effect Sept. 1, and other products, including apparel, footwear and electronics will have the tariffs applied on Dec. 15.

According to the NRF, retailers are using a myriad of mitigation tactics to limit the impact on consumers, and the impact will ultimately vary by company and product. But small businesses, in particular, have already been forced to raise prices.

Nonetheless, 79 percent of consumers surveyed for NRF in September were concerned that tariffs will cause prices to rise, potentially affecting their approach to shopping. “Virtually everything imported from China is going to be subject to tariffs by the end of this year,” Shay said.

Still, Kleinhenz characterized consumer households are in “relatively good shape, wages look healthy, inflation is modest, debt burdens are low and well managed, and disposable income is relatively stable in the 4.5 percent range in the last few months. Consumers still feel good with money in their pockets.”

Switching to seasonal holiday, the NRF expects retailers to hire between 530,000 and 590,000 temporary workers, a decline from last year’s 554,000.

A number of factors would contribute to the decrease, including the tight labor market, store closings and rising spending through the Internet, though that has motivated retailers to step up hiring at distribution centers and in transportation areas.

Later this month, the NRF will issue research forecasting how consumers will be spending on gifts, and where they will put their dollars.

Shay acknowledged that the holiday season, in terms of shopping, continues to be elongated, as retailers promote deals earlier, well before Black Friday, attracting early shopping, while other consumers wait until the last minute before Christmas to wrap up their gift shopping. They know retailers have become faster and more sophisticated and provide more options for customers to receive packages.

 

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