By: Krystina Gustafson
A more confident group of consumers are expected to loosen their purse strings this holiday, and are seen sparking an acceleration in retail sales growth over last year.
The National Retail Federation on Tuesday said it expects retail sales excluding automobiles, gasoline and restaurants to rise 3.6 percent in November and December, to $655.8 billion. That would mark an acceleration over last year’s 3 percent increase, and would easily top the 10-year average of 2.5 percent growth.
The trade organization’s forecast, considered the industry benchmark, is based on an economic model that factors in consumer credit, monthly retail sales and personal income.
NRF anticipates non-store sales, which skew toward digital, will increase between 7 percent and 10 percent, to as much as $117 billion.
“We have a lot more people working this year,” Jack Kleinhenz, NRF’s chief economist, told reporters.
When factoring in other indicators like wage growth and higher home prices, “our general sense of the economy is that we’re in better shape than we were last year,” Kleinhenz said.
Retailers got off to a rocky start in 2016, as last winter’s unseasonably warm temperatures left their shelves stocked with coats and scarves. Stores were forced to aggressively discount these items to make way for spring goods, cutting into their margins. Retailers have finally gotten their inventory levels in check, boding well for their profitability this season.
Yet even as more Americans are working and receiving slightly higher paychecks, they’ve been reluctant to spend on traditional retail goods — namely apparel. Broad-based discounting has also cut into retailers’ top lines, requiring them to sell more items to record a gain.
And weather once again took a toll on sales in August and September, thanks to a warm back-to-school and early fall selling season. High temperatures dented apparel specialty stores’ revenue by $393 million during those two months as compared with the prior year, according to new research by Planalytics.
More broadly speaking, data from the Commerce Department shows that retail sales in August slipped on a monthly basis for the first time since March.
Despite the slowdown, Planalytics predicts temperatures on the densely populated East Coast will be more in line with typical years this holiday, which should help spur demand for cold-weather categories. And while some holiday purchases may be pushed back because of the election, the trade organization said it does not anticipate political uncertainty to dent sales.
“This year has not been perfect,” NRF President Matthew Shay conceded. “Overall we think this is a realistic number and very reflective of the current environment.”
Like NRF, separate forecasts from Deloitte, AlixPartners, the International Council of Shopping Centers and RetailNext are all calling for growth between 3.2 percent and 4 percent. PwC expects a more robust 10 percent lift in spending; unlike the other predictions, its forecast includes spending on restaurants and travel.
Retail sales excluding automobiles and parts rose 2.8 percent through August, according to the Commerce Department.