Retailers’ holiday selling season has “unofficially begun” and it’s going to be another extended period, according to the National Retail Federation.
On Tuesday, the NRF forecast that sales in November and December will increase a “solid” 3.6 percent to $655.8 billion based on consumer’s being in better financial shape than in recent years past.
“Consumers are just in a much stronger position relative to where they have been over the last few years, even compared to last year,” said NRF president and chief executive officer Matthew Shay during a media briefing Tuesday on the outlook for holiday 2016.
“Consumers are doing the heavy lifting. They’re keeping the economy growing. Consumers are the one element of the economy that really looks good,” Shay said. Clearly, consumers have more household income, net worth hit a new record, wages are growing, job creation is improved, inflation is very tame. Their overall increase in net worth means consumers have greater capacity to spend.”
“The shopping season has unofficially begun,” added NRF’s chief economist Jack Kleinhenz. “Some retailers have announced layaway plans. Some stores are stocking merchandise holiday. We believe [consumers] are shopping already and using the Internet and mobile technology to think about what to buy.”
However, the presidential election and Americans spending more of their dollars on services and experiences rather than material goods, will impact retail sales. “Once it’s past the second week of November, we are back in game time,” Kleinhenz said.
The predicted 3.6 percent lift in total holiday sales is higher than last year’s 3 percent gain; higher than the 10-year average of 2.5 percent, and above the seven-year average of 3.4 percent since the nation’s economic recovery began in 2009.
NRF is also forecasting non-store sales, which includes Internet, kiosk and catalogue sales, to increase between 7 and 10 percent to as much as $117 billion. One sixth of total spending is non-store. NRF’s forecast for holiday sales excludes auto, gas and restaurants. NRF’s holiday sales forecast is based on an economic model using several indicators including consumer credit, disposable personal income and previous monthly retail sales releases.
“Consumers have seen steady job and income gains throughout the year, resulting in continued confidence and the greater use of credit, which bodes well for more spending throughout the holiday season,” Kleinhenz said. “Increased geopolitical uncertainty, the presidential election outcome and unseasonably warm weather are the main issues at play with the greatest potential to shake consumer confidence and impact shopping patterns.
“However, the economic spending power of the consumer is resilient and it should never be underestimated,” continued Kleinhenz.
The NRF also said that retailers are expected to hire between 640,000 and 690,000 seasonal workers this holiday season, in line with last year’s 675,300 new holiday positions. Retailers are better prepared for holiday, having worked for months to lower inventory levels.
Shay said the NRF has found no measurable impact from the presidential election and the uncertainties it brings, on spending for gifts. “This is a time of gift giving, it may be a secular tradition. It may be a religious tradition. But I don’t get the sense that the gift giving will be affected.”
“Certainly, one of the candidates has done an enormous job of trying to talk down both the current and future state of America,” Shay added. “if you believe one of the candidates, things are terrible,” Shay said, without naming the candidate he was referring to. However, while the candidate’s words may be dragging down the psyche of the electorate, it didn’t drag down the forecast. “You’ve got to look at the broader picture, consumer confidence is suggesting people are okay with their finances.”
The NRF disagrees with several of the positions taken by candidate Hillary Clinton and Donald Trump, including their opposition to the Trans-Pacific Partnership. The NRF is also opposed to raising the minimum wage.
The NRF will release the results of a consumer expectations survey at the end of October, which will indicate how much on average they intend to spend on holiday gifts; when they will be doing most of their shopping, and on what categories of merchandise they will shop the most. Apparel has been tough all year with only a few pockets of life depending on the category.