The National Retail Federation predicts that holiday retail sales will increase between 4.3 and 4.8 percent over 2017 for a total of $717.45 billion to $720.89 billion.
The forecast compares with an average annual increase of 3.9 percent over the past five years.
Holiday sales in 2017 totaled $687.87 billion, a 5.3 percent increase over the year before. It was the largest increase since the 5.2 percent year-over-year gain seen in 2010 after the end of the Great Recession. The NRF defines holiday sales as the November-December period and excludes automobiles, gasoline and restaurants from its forecast. Brick-and-mortar, online and other non-store sales are included in the forecast, which factors several indicators including employment, consumer credit, disposable personal income and previous monthly retail sales.
“The strength of economy, the health of consumers, and the overall state of retail — those really are the three factors that go into our forecast,” said NRF president and chief executive officer Matthew Shay, during a press conference Wednesday morning. He also cited tax reform, wage gains and mobility in the workforce as factors fueling increases.
“While there is concern about the impacts of an escalating trade war, we are optimistic that the pace of economic activity will continue to increase through the end of the year,” Shay added.
Tariffs, as well as rising medical and gas costs could dampen today’s high levels of consumer confidence and toss headwinds into the shopping. In addition, there is concern that the tight labor market could make it hard for some retailers to get all the seasonal help they need to manage the Christmas rush. Hurricane Florence impacted large and small retailers in the South, primarily North Carolina, South Carolina and Virginia, but spending on home repairs and supplies typically goes up after a hurricane passes, offsetting some of the lost sales during the event.
And many retailers will be lapping strong results from last year, making sales comparison challenging.
Still, NRF officials were optimistic that holiday sales will be healthy, and noted that certain issues, such as inflation and tariffs, aren’t critical to the holiday outcome.
“I wouldn’t say there is a sense of euphoria, but there is an expectation that this period of positive environment continues for another few quarters, another year,” Shay said. “It’s hard to predict beyond that. There is a recognition that there are some uncertainties out there that need to be worked through.”
“Last year’s strong results were thanks to growing wages, stronger employment and higher confidence, complemented by anticipation of tax cuts that led consumers to spend more than expected,” NRF chief economist Jack Kleinhenz said. “With this year’s forecast, we continue to see strong momentum from consumers as they do the heavy lifting in supporting our economy. The combination of increased job creation, improved wages, tamed inflation and an increase in net worth all provide the capacity and the confidence to spend.”
The NRF officials said seasonal employment nationwide could grow to between 585,000 to 650,000 workers, up from last year’s 582,500. NRF’s holiday forecast is consistent with its forecast from last August that annual retail sales for 2018 will increase at least 4.5 percent over 2017.
Shay said the retail industry “is continuing to transform itself” with new forms of consumer engagement, investments in technology, and by identifying new platforms for distribution and fulfillment.
“Across the board, the industry is in a better, stronger, healthier place. We will see continued momentum in third and fourth quarters in GDP growth, maybe not as strong as the second quarter.”
“We have rarely seen as many economic gauges so strong,” Kleinhenz said, noting that some 2.3 million jobs were added in the last 12 months.