Monday, December 3, 2018

Retail industry experiencing surge in holiday sales

Photo: stevepb/pixabay

By Allen Jones, TEXPERS Communications Manager

Brick-and-mortar and online retailers are expecting holiday sales this year to increase between 4.3 and 4.8 percent over last year, ringing up somewhere between $717.45 billion and $720.89 billion October through December.

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The forecast comes from the National Retail Federation, the world’s largest retail trade association consisting of department stores, specialty, discount, catalog, internet, and independent retailers; chain restaurants and grocery stores. The projection, which excludes automobile, gasoline and restaurant sales, compares with an average annual increase of 3.9 percent over the last five years.

“Our forecast reflects the overall strength of the industry," says Matthew Shay, president and CEO of the National Retail Federation, in a news release. “Thanks to a healthy economy and strong consumer confidence, we believe that this holiday season will continue to reflect the growth we’ve seen over the past year. While there is concern about the impacts of an escalating trade war, we are optimistic that the pace of economic activity will continue to increase through the end of the year.”

The trade association didn’t have any Texas-specific data. However, the Houston Chronicle recently reported that the average family in the state’s largest city is expected to spend $1,512 this holiday season, which is just shy of the national average of $1,536. The news article’s data comes from a survey conducted by accounting and consulting firm Deloitte.
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The firm also looked at the Dallas/Fort Worth metropolitan area and projected that shoppers there would spend about the same as their national counterparts. Deloitte’s annual holiday economic forecast is a bit higher nationally than the projection provided by the National Retail Federation. You can view Deloitte’s full report online.

Although Deloitte’s forecast for the nation is between 5 and 5.6 percent, the bottom line is that holiday sales projections are optimistic. Both sales estimates also point to strong online sales, with Deloitte reporting that the internet remains the lead shopping medium with 57 percent of sales expected to occur online.

Already, Adobe Analytics is reporting that Black Friday, the day-after-Thanksgiving retail sales push often regarded as the first day of the traditional Christmas shopping season, saw online stores alone pull in a record $6.22 billion. This new high in online Black Friday spending is a 23.6 percent increase from a year ago. The company, which tracks transaction for 80 of the top 100 internet retailers in the U.S. like Walmart and Amazon, also reports that this year’s Friday after Thanksgiving was the first to see shoppers spend more than $2 billion on smartphones.

According to the National Retail Federation, consumers will focus spending on gifts ($637.67); non-gift holiday items such as food, decorations, flowers and greeting cards ($215.04); and other non-gift purchases that take advantage of the deals and promotions throughout the season ($154.53).

Jack Kleinhenz, the chief economist for the retail trade association, says several factors are behind the optimistic holiday spending forecasts, including one of the lowest unemployment rates the U.S. has seen in decades, higher hourly earnings, and increases in net worth.

“When you go across all of those indicators, the landscape looks very good for the holiday season,” he said during a phone interview with TEXPERS. “That’s consistent, no doubt, with a very strong economic performance for the economy.”

Public pension systems make investments on behalf of their active and retired members. The National Retail Federation doesn’t provide financial recommendations, but Kleinhenz says retail sales is another critical component of an overall economic outlook.

“The economy isn’t just the stock market,” he says.

Plus, the holiday sales forecast is just a snapshot of a few months out of an annual or multi-year context.

“Consumer attitudes are very strong,” he says. “I think you’ve got to just take that into context. The consumer, when they believe their finances have improved steadily, that means they are in a position to spend. Certainly, the consumer has been the driver of the economy, actually since the expansion started in 2009 [after the great recession].”

The trade association’s annual holiday spending forecast takes into account several economic factors to project overall spending instead of relying on per-consumer spending assumptions. Also, according to the NRF’s forecast, gift cards are the most popular items on holiday wish lists, requested by 60 percent of those surveyed, followed by clothing and accessories at 53 percent, books/movies/music at 37 percent, electronics at 29 percent, home d├ęcor at 23 percent, jewelry at 22 percent, personal care or beauty items at 19 percent, sporting goods at 18 percent and home improvement items at 17 percent.

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