NRF issues positive 2018 holiday retail sales forecast

The National Retail Federation said earlier today it is feeling fairly positive about 2017 holiday season retail sales.

These sales, as defined by the NRF, are sales in the months of November and December and exclude autos, gas, and restaurant sales. For 2017, NRF is calling for holiday retail sales to be up 3.6%-4% annually, coming in at an estimated total between $678.75 billion to $682 billion, which is ahead of last year’s $655.8 billion, even at the lower end of the 2017 estimate.

What’s more, NRF said that 2017 would top or exceed 2016’s holiday retail sales tally of 3.6%, as well as the five-year average of 3.5%.

NRF said the model it uses to forecast retail sales is based on an economic model using various economic indicators, including consumer credit, disposable personal income, and previous monthly retail sales data, with the over all number including the non-store category (direct-to-consumer, kiosks, and retail sales).

A calendar-related factor helping to augment 2017 retail sales, according to the NRF, is that Christmas this year comes 32 days after Thanksgiving, providing one more day than in 2016 and falls on a Monday rather than a Sunday, which offers consumers another day on the weekend to get shopping done.

On a conference call earlier today, NRF President and CEO Matthew Shay said he is encouraged by this forecast, as this range is positive over all and in line, or, better than 2016’s.

“One thing is the strength of the economy as a whole,” he said. “The recent economic growth number of 3% [GDP] is very good…and not as robust as we would like to see but still very solid,” he noted. “It shows that the economy is expanding at a steady but modest pace. We think the economy is in a very good place. The current state of retail is also positive and strong across the board. The industry is making big investments, with bricks and mortar companies spending more to improve what they do online, as well as legacy online players that are getting better at connecting with consumers in non-traditional channels, including bricks and mortar locations. Our forecast reflects the steady momentum of the economy and industry expectations.”

Shay said that the strength of the consumer is another factor weighing into the positive forecast, with consumers largely responsible for the “heavy lifting” of the economy and keeping growth going forward, even though the final reading for the Thomson Reuters Consumer Sentiment Index for September at 95.1 showed a slight decline after a seven-month high in August.

Even with the decline, he said this data shows a willingness to spend on behalf of consumers, coupled with how they are accessing credit and taking on additional debt.

Addressing e-commerce’s impact on retail sales, Shay said that it online retail helps to make retailers better merchants, serving as a means to an end, rather than an end itself.

“Those that successfully figure out how to bridge the gap and reach consumers where they are using a balance of both physical and digital are going to be successful, and that based on the historical basis of those companies they are always going to have a foot in one camp or the other, with more more firmly rooted than the other,” he said, “but nevertheless it is a dynamic place, [albeit one] with volatility and tramnsformation, but we feel very positive about what is happening and energized by the conversations taking place, and we are expecting to see these things playing a role and coming to the fore during a really exciting period over the next few months.”

According to NRF Chief Economist Jack Kleinhenz, this forecast reflects the momentum of the economy.

“We have seen in the past, though, that there are transitory events,” he said. “Years ago, there was a debate on the debt ceiling, there was also the threat of a government shutdown, and there have been severe weather events. This year is not any different in some respects, as the weather will be a major factor in impacting the data. It is like flying without some instrumentation, as readings on things like unemployment and consumer sentiment could be clouded, unfortunately, by the effects of the hurricanes. I expect spending to continue modestly. It reflects gains in employment and wages, too.”