The National Retail Federation issued an upbeat holiday forecast despite the ongoing COVID-19 pandemic, citing a strong stock market, rising home values and record personal saving rates.
Sales during November and December will increase between 3.6% and 5.2% over 2019 to $755.3 billion and $766.7 billion, according to the NFR’s annual holiday forecast. The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with a 4% increase to $729.1 billion last year and an average holiday sales increase of 3.5% during the past five years.
“Consumers have shown they are excited about the holidays and are willing to spend on gifts that lift the spirits of family and friends after such a challenging year,” said NRF president and CEO Matthew Shay. “We expect a strong finish to the holiday season, and will continue to work with municipal and state officials to keep retailers open and the economy moving forward at this critical time.”
NRF expects that online and other non-store sales, which are included in the total, will increase from 20% to 30% to between $202.5 billion and $218.4 billion, up from $168.7 billion last year.
“Given the pandemic, there is uncertainty about consumers’ willingness to spend, but with the economy improving most have the ability to spend,” said NRF chief economist Jack Kleinhenz. “After all they’ve been through, we think there’s going to be a psychological factor that they owe it to themselves and their families to have a better-than-normal holiday.”
Kleinhenz said households have strong balance sheets supported by a strong stock market, rising home values and record savings boosted by government stimulus payments issued earlier this year. Other positive factors include growth in jobs and wages, low energy costs and reduced spending on personal services, travel and entertainment (due to COVID-19), which has has freed up money for retail spending.
Kleinhenz acknowledged that sales could be affected by the spike in COVID-19 infections.
“There are risks to the economy if the virus continues to spread, but as long as consumers remain confident and upbeat, they will spend for the holiday season,” he said.
Earlier this month, the NRF released a survey in which 42% of consumers said they had started their holiday shopping earlier this year than they normally do.
While not all retailers have recovered as quickly as others, in the aggregate, retail sales have seen a V-shaped recovery, according to the NRF, growing both month-over-month and year-over-year each month since June. As calculated by NRF, for the first 10 months of this year, retail sales were up 6.4% versus the first 10 months of 2019. Month-over-month, retail sales grew for the sixth month in a row in October, but the pace of growth slowed.
Weather traditionally plays a role in holiday sales. While details vary by region, the National Weather Service is forecasting cooler and wetter weather in the north and warmer and drier weather in the south. Kleinhenz said that combination has correlated with stronger retail holiday spending in the past and could be a factor this year.
The NRF forecast is based on an economic model that takes into consideration a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit, previous retail sales and weather. NRF defines the holiday season as November 1 through December 31. Numbers forecast by NRF may differ from other organizations that define the holiday season as a longer period or include retail sectors not included by NRF, such as automobile dealers, gasoline stations and restaurants.