Washington – The Chief Economist of the National Retail Federation has said that while the continued impact of the pandemic on the nation’s economy will be a key factor in sales for the 2021 holiday season, consumers are ready and able to spend.
“There are several factors that combine to have a major impact on the vacation outlook, but household fundamentals are a bright spot in the uncertain present,” said Jack Kleinhenz. “Consumers are in a very favorable position at the start of the last few months of the year and spend because they can.”
Kleinhenz’s remarks came as part of the NRF’s Monthly Economic Review, which expanded on the rationale behind NRF’s forecast last week that 2021 holiday retail sales in November and December will increase between 8. 5% and 10.5% compared to 2020 for a total of between $ 843.4 billion and $ 859 billion. The NRF claims that even at the lower end of the forecast, this would be both the highest growth rate, surpassing the 8.2% last year, and the highest total amount on record, exceeding the $ 777.3 billion from last year.
The forecast excludes car dealerships, gas stations and restaurants to focus on core retail, but includes online sales, which are expected to increase 11-15% to $ 218.3 billion and 226. , $ 2 billion.
Kleinhenz said the pandemic raises the question of whether COVID-19 cases will continue their downward trend and whether this will increase consumer confidence and lead to increased spending. And if consumers spend more, will they continue to purchase retail products or will spending start shifting to services if they become more comfortable traveling, dining, or attending events? sports and entertainment?
The NRF’s forecasting model examines these factors along with disposable income, past retail sales, employment, wages, weather, energy prices, and other variables. Despite “complex mechanisms and forces at work,” the outlook is favorable for strong growth in retail sales this holiday season.
An estimated $ 2.5 trillion “savings buffer” accumulated by consumers who largely stayed at home rather than dining out or traveling during the pandemic has “supercharged” spending. Meanwhile, incomes are rising in the form of more jobs, more hours and higher wages reflecting business competition for workers during the current labor shortage. Household wealth hit a new record in the second quarter (latest data available) and boosted consumer confidence.
Spending continued at a strong pace throughout 2021 – up 14.5% year-on-year for the first nine months – and returned to pre-pandemic levels for many retail categories. While some people who lost their jobs last year still face financial difficulties, data collected by Harvard University shows spending by low-income consumers rose 22.3% at the end of September compared to January 2020 before the pandemic. This number seems to reflect the increase in unemployment benefits. and other stimulus funds like the new child tax credit.
Kleinhenz said strong income growth and “accumulated savings” should help spending weather inflation that has been driven by both consumer demand and supply chain disruptions. The challenge when – and if – sales start to decline will be whether the decline is caused by lower demand or reduced product availability.
Kleinhenz said higher gasoline prices and higher energy costs for home heating will divert money, particularly with meteorologists saying a La Niña model will likely bring cold weather this winter, but the NRF notes that a La Niña has coincided with stronger retail sales in the past.