NRF FORECASTS A HAPPY HOLIDAYS FOR RETAILERS

The National Retail Federation (NRF) said on Thursday that it expects holiday retail sales during November and December to increase between 3.8 percent and 4.2 percent over 2018 to a total of between $727.9 billion and $730.7 billion. The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with an average holiday sales increase of 3.7 percent over the previous five years.

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

The effect of tariffs on holiday spending – either directly or through consumer confidence – remains to be seen. Some holiday merchandise – including apparel, footwear and televisions – is subject to new tariffs that took effect September 1st, and other products will have the tariffs applied on December 15th. Retailers are using a myriad of mitigation tactics to limit the impact on consumers, and the impact will ultimately vary by company and product. 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.

Holiday sales during 2018 totaled $701.2 billion, an unusually small increase of 2.1 percent over the year before amid a government shutdown, stock market volatility, tariffs and other issues.

“The U.S. economy is continuing to grow and consumer spending is still the primary engine behind that growth,” said Matthew Shay, president and CEO at NRF. “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,” added Jack Kleinhenz, chief economist at NRF. “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.”