Holiday sales expected to rise 3.6%

NEW YORK » Americans are expected to spend at a faster clip than last year for the critical holiday season, helped by an economy that should only continue to pick up, according to the nation’s largest retail industry trade group.

The National Retail Federation, based in Washington, D.C., is forecasting holiday sales for the November and December period to rise 3.6 percent to $655.8 billion, much better than the 3 percent growth seen in the year-ago period.

The figure also is much higher than the 10-year average of 2.5 percent and above the 3.4 percent growth seen since the recovery began in 2009. The dollar figure excludes sales from autos, gas and restaurants but includes online spending and other nonstore sales. The group estimates that non-store sales should rise 7 percent to 10 percent to as much as $117 billion. Last year, that rate was 9 percent.

NRF President and CEO Matthew Shay noted that this year has had some rocky moments like a warm winter and an unseasonably warm fall. That has hurt sales of clothing and forced stores to discount more heavily. But Shay said all the fundamentals are in place even if the noise from the presidential elections might serve as a short-term distraction.

“Our forecast reflects the very realistic steady momentum of the economy and industry expectations,” Shay said. “We remain optimistic that the pace of economic activity will pick up in the near term.”

The forecast is based on an economic model that takes into account such indicators as consumer credit, disposable personal income and monthly retail sales. It’s a key industry barometer for retailers who depend on the last two months of the year. Holiday sales account for nearly 20 percent of annual retail industry sales. It also offers a

snapshot of the mindset of the shopper.

The forecast comes as retailers continue to wrestle with broader changes in how shoppers are buying. They’re shifting more of their money to experiences like travel and away from clothing and other stuff. And they’re increasingly buying more online, forcing stores to look at new ways to bring shoppers into their stores.

But National Retail Federation executives told reporters on a call Tuesday there’s plenty of reason for optimism.

“We are in better shape than we were last year,” said the retail trade group’s economist, Jack Kleinhenz.” We have a lot more people working this year.”

Government figures show that 2.5 million more Americans have jobs as of August compared to a year earlier. The government is scheduled to release September job numbers on Friday. The current unemployment rate is 4.9 percent, lower than the 5.1 percent rate a year ago.

And a report from the Census Bureau that was released last month showed that U.S. households got a raise last year after seven years of sluggish incomes. Increasing pay also boosted the poorest households, slashing poverty by the sharpest amount in nearly a half a century. The median U.S. household’s income rose 5.2 percent in 2015 to an inflation-adjusted level of $56,516, according to the Census. That

marks the largest one-year gain on data dating back to 1967. It’s up 7.3 percent from 2012, when incomes declined to a 17-year-low.

Given the tight labor market, retailers are even dangling perks like higher pay, extra discounts and more flexible schedules to lure temporary holiday workers. Still, while the overall number of jobs for seasonal workers looks to be flat this year, the biggest growth area in recent years has been in transportation and warehouse jobs because of the rise in online shopping.

Shoppers also are enjoying lower food prices at the grocery store, which offer relief to those living from paycheck to paycheck.

The National Retail Federation

warned that geopolitical uncertainty, the presidential election and unseasonably warm weather could hurt shopping patterns. Last year, for example, major stores like Macy’s had to aggressively discount coats and boots after mild temperatures lingered into the winter months because shoppers didn’t need to buy heavy winter apparel. That hurt holiday sales. In fact, the National Retail Federation’s original forecast was for a 3.7 percent increase.

Kleinhenz said stores are being more watchful of their inventory compared to last year.

And while the political rallies seem to be airing a lot of discontent among voters, Kleinhenz said that

one has to separate their attitudes toward the political world and how they are going to spend for the holidays for their loved ones.

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

Other forecasts from Deloitte, RetailNext, International Council of Shopping Centers and AlixPartners offer forecasts similar to that of the National Retail Federation. The growth forecasts range from 3.2 percent to 4 percent. PwC, however, predicts that holiday spending will up 10 percent. But that forecast for the first time includes travel and entertainment. Other holiday forecasts exclude restaurants and travel.