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NRF predicts highest holiday sales on record

Holiday sales for 2021 are expected to increase by 8.5% to 10.5% over 2020.

The upcoming holiday shopping season promises to be one for the record books despite supply chain problems, according to a new forecast.

Holiday sales during November and December will rise between 8.5% and 10.5% over 2020, totaling between $843.4 billion and $859 billion, the National Retail Federation said Wednesday. The forecast which excludes automobile dealers, gasoline stations and restaurants, compares with a previous high of 8.2% in 2020 (to $777.3 billion) and an average increase of 4.4% during the past five years. The outlook for the holiday season looks very bright,” said NRF chief economist Jack Kleinhenz. “The unusual and beneficial position we find ourselves in is that households have increased spending vigorously throughout most of 2021 and remain with plenty of holiday purchasing power.”

While e-commerce will remain important, households are also expected to shift back to in-store shopping and a more traditional holiday shopping experience. NRF expects that online and other non-store sales, which are included in the total, will increase between 11% and 15% to a total of between $218.3 billion and $226.2 billion driven by online purchases. The total is up from $196.7 billion in 2020.

Kleinhenz noted that pandemic-related supply chain disruptions have caused shortages of merchandise and most of the year’s inflationary pressure. But strong household fundamentals provide optimism amid the uncertainty, he added, with income growing from wage compensation. Also, household wealth has reached another record high. All these factors combined support strong spending this holiday season.

“With the prospect of consumers seeking to shop early, inventories may be pulled down sooner and shortages may develop in the later weeks of the shopping season,” Kleinhenz said. “However, if retailers can keep merchandise on the shelves and merchandise arrives before Christmas, it could be a stellar holiday sales season.”

The economist added a note of caution, however. He said that while it appears new COVID-19 infections and hospitalizations are down, a variant surge could potentially sidetrack the current trajectory of spending.

Other holiday forecasts have also predicted a strong holiday season. Sales in November and December are expected to grow at least 7% over last year, according to different forecasts from Deloitte and Mastercard SpendingPulse.

[Read More: Double-digit holiday sales increase is retailers ‘to lose,’ says AlixPartners]

In other holiday-related data, NRF expects retailers will hire between 500,000 and 665,000 seasonal workers this year, compared with 486,000 seasonal hires in 2020. Some of the hiring may have been pulled into October as many retailers encouraged households to shop early to avoid a lack of inventory and shipping delays. Retailers have announced thousands of open positions in brick-and-mortar stores and warehouses and distribution centers.

Weather traditionally factors into holiday sales, and the National Oceanic and Atmospheric Administration is predicting a high likelihood of a La Niña pattern of cooler and wetter weather in the north and warmer and drier weather in the south. This climate phenomenon has in the past correlated with stronger retail sales and could be a factor in 2021.

NRF's holiday forecast is based on economic modeling that considers 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.

The methodology used to calculate holiday retail employment in 2020 was changed to accommodate the sizeable impact of COVID-19 on overall industry employment. In 2021, NRF returned to a traditional employment buildup method.

Additional holiday information is available on NRF’s Winter Holidays web page.

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