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Holiday Retail Sales Forecast Healthy

aa-10-15-16-1The National Retail Federation expects retail sales in November and December, excluding autos, gas and restaurant sales, to increase a solid 3.6% to $655.8 billion.

NRF notes that this would be higher than last year and significantly higher than the 10-year average of 2.5%. If sales turn out to be that strong, then they also will be above the seven-year average of 3.4% since recovery began in 2009.

In addition, NRF forecasts that non-store sales – including ecommerce – will increase between 7 and 10%, to as much as $117 billion.

But those numbers from NRF may turn out to be over optimistic for the November-December period because other research shows that consumers began their Christmas shopping earlier this year.

“All of the fundamentals are in a good place, giving strength to consumers and leading us to believe that this will be a very positive holiday season,” NRF President Matthew Shay said.

“This year hasn’t been perfect, starting with a long summer and unseasonably warm fall, but our forecast reflects the very realistic steady momentum of the economy and industry expectations,” he added. “We remain optimistic that the pace of economic activity will pick up in the near term.”

Holiday sales in 2015 increased 3.2% over the previous year. The 2015 holiday season offered some tough obstacles for the retail industry, including weather and inventory challenges, NRF explained.

Average spending per person during the 2015 holiday season was over $800 for the second year in a row, with more than half of shoppers choosing to splurge on non-gift items for themselves, according to the federation.

“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,” NRF Chief Economist Jack Kleinhenz observed.

“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,” he said.

“However, the economic spending power of the consumer is resilient and it should never be underestimated,” Kleinhenz added.

NRF’s holiday sales forecast is based on an economic model deploying several indicators, including consumer credit, disposable personal income and previous monthly retail sales releases.

The overall forecast includes the non-store category — direct-to-consumer, kiosks and online sales.

In a poll conducted in mid-September by the market research firm CreditCards.com, 14% of consumers reported that they already had begun their holiday shopping (and 1% said they had finished).

However, the vast majority are not happy with “Christmas creep” – stores beginning holiday sales earlier and earlier each year. Of the 73% who agreed that it is annoying that the holiday shopping season starts earlier, 48% said they strongly agreed. Of all consumers polled, just 21% disagreed.

“If the consumers are asking for holiday products earlier in the year, you are more than likely to see retailers start having a small assortment by late summer and build up their inventory as we move into the holiday season,” explained Ana Serafin Smith, spokeswoman for NRF.

The CreditCards.com poll finds that retail stores remain the most popular method of shopping, with 58% of respondents saying this will be their main way to shop for the holidays. Shopping online was favored by 21%, while shopping on a mobile device was less popular with 11%.

Millennials are the most excited about shopping via mobile, the survey found. One in five people ages 18 to 35 said their mobile devices would be their primary way to shop for the holidays.

In addition, about one-third of Millennials said they are not annoyed by early holiday shopping, double the rate of Baby Boomers. A sign that November-December sales may not be all that robust is that NRF says retailers are expected to hire between 640,000 and 690,000 seasonal workers this holiday season, which it says will be in line with last year’s 675,300 additional holiday positions.

The outplacement consulting firm Challenger, Gray & Christmas Inc. says retailers will hire more than 700,000, down from the 739,000 added in 2015.

“The sector with the biggest increase in holiday hiring in recent years has been transportation and warehousing, as more and more holiday shopping is done online,” said CEO John Challenger.

UPS is hiring an additional 95,000 seasonal workers, up only slightly from last year’s 93,000, while FedEx is hiring about 50,000, down from the 55,000 it hired last year.

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