The National Retail Federation expects holiday retail sales to increase between 3.6 and 4 percent in November and December from last’s year period.
Sales are seen totaling between $678.75 billion and $682 billion, compared to last year’s $655.8 billion.
NRF’s forecast is consistent with the one made by the International Council of Shopping Centers on Monday, predicting a 3.8 percent increase in holiday spending. PwC was more bullish, forecasting a 6 percent gain in holiday sales, though that forecast includes travel and entertainment as well as gifts.
It’s the first time the NRF’s forecast was in the form of a range rather than a specific percent. The NRF said it used a range because the recent hurricanes that destroyed much of Texas, Florida and Puerto Rico made forecasting more challenging. NRF’s forecast is based on an economic model using consumer credit, disposable personal income and monthly retail sales. The overall number tallies store and non-store sales, which include the direct-to-consumer, kiosks and online channels. The forecast excludes automobiles, gasoline and restaurants.
“Our forecast reflects the very realistic steady momentum of the economy and overall strength of the industry,” NRF president and chief executive officer Matthew Shay said Tuesday. “Although this year hasn’t been perfect, especially with the recent devastating hurricanes, we believe that a longer shopping season and strong consumer confidence will deliver retailers a strong holiday season.” Shay said he believes the hurricanes will not have a significant, long-term effect on the economy.
Christmas falls 32 days after Thanksgiving this year, compared to 31 last year, and is on a Monday instead of Sunday, giving consumers an extra weekend day to complete their shopping.
The NRF forecast for holiday 2017 matches or exceeds last year’s growth of 3.6 percent and the five-year average of 3.5 percent.
“Consumers continue to do the heavy-lifting in supporting our economy, and all the fundamentals are aligned for them to continue doing so during the holidays,” said NRF chief economist Jack Kleinhenz. “The combination of job creation, improved wages, tame inflation and an increase in net worth all provide the capacity and the confidence to spend.”
While sales are seen going up, seasonal hiring will be less than 2016, as NRF forecasts seasonal employment to grow between 500,000 and 550,000, from last year’s 575,000.
According to the ICSC, the top four categories for purchases this year will be gift cards, with 66 percent of holiday shoppers purchasing them, followed by apparel/footwear with 54 percent of consumers buying the category, then toys and games, at 46 percent, and electronics/devices, at 37 percent.
Shay said the nation’s economic growth, at about 2 percent, is not as robust as retailers would like, but the economy is “very solid and continues to expand at a steady pace,” according to Beige Book reports.
He disputed media headlines portraying retail as weak. “The truth is across the board the state of the retail industry is very strong. Certainly there are exceptions, but across the board the industry is very strong and making big investments,” in brick-and-mortar and online operations, while legacy online players invest in brick-and-mortar.
Consumers are showing a willingness to spend, access credit and take on additional debt, he said, adding, “That combination along with job creation, improved wages, tame inflation and the increase in net worth and wealth affect, all provides confidence to spend and invest.
“We are optimistic that the pace of economic activity will continue and pick up in the near term,” Shay said. “Retail is not dead or dying. It’s certainly transforming.”
Sounding a note of caution, Kleinhenz said average earnings are about the same as last year and that households are facing rising health-care and housing costs and gasoline prices are up, sometimes by 30 to 40 cents. “That puts a ding in spending, [but] overall, I think consumers will stay the course, continue to be pragmatic, looking for value, price and convenience.”
Asked what types of retailers would perform best for holiday, Shay said winners will be “pretty well distributed across all retail sectors” while Kleinhenz suggested smartphone launches could lift some retailers. “Video games are still another hot item and appliances are still competitive,” he said. “In terms of fashion, I haven’t heard of any notable new fashion.”