Economy Watch: Retail Sales Promise Holiday Cheer

Consumer confidence could boost sales a higher-than-average 3.6 percent in November and December.
Courtesy Flickr Creative Commons user slowburn

Courtesy Flickr Creative Commons user slowburn

The National Retail Federation expects U.S. holiday sales to increase a solid 3.6 percent this year to $655.8 billion. That’s significantly higher than the 10-year average uptick of 2.5 percent and even the 3.4 percent recorded on average since the economic recovery began in 2009. NRF’s projection covers retail sales in November and December, not including autos, gas and restaurants.

Physical retailers (and their landlords) will likely benefit from the uptick, if the prediction proves accurate. But so will virtual retailers: the NRF also forecasts that online sales will increase between 7 percent and 10 percent this year and could reach $117 billion. On the whole, retailers are expected to hire between 640,000 and 690,000 seasonal workers this holiday season, in line with last year’s 675,300 holiday positions.

According to NRF chief economist Jack Kleinhenz, consumers have seen steady job and income gains throughout the year, resulting in continued confidence and the greater use of credit. That bodes well for more spending throughout the holiday season. On the other hand, there are wild cards that could shake shoppers’ confidence or otherwise affect sales: geopolitical uncertainty, the results of the presidential election and unseasonably warm weather.

NRF’s holiday sales forecast is based on an economic model using several indicators, including consumer credit, disposable personal income and previous monthly retail sales releases. The overall forecast includes the non-store category, which are direct-to-consumer, kiosks and online sales.