Questions about Retail Sales this Holiday Season

By at 15 November, 2021, 9:18 am


by Raymond J. Keating –

There’s plenty of things for retailers, who are overwhelmingly small businesses, to be concerned about this year, so a solid Christmas holiday shopping season would be most welcome. As for expectations, it depends on which set of information you’re paying attention to in the end.

The many worries include inflation raging to questions about taxes to supply chain challenges to a perplexing labor market that combines labor shortages with still large numbers of people not working to questions about economic growth.

But now, of course, we have moved into the most important time of the year for many retailers, i.e., the holiday shopping season.

Sales Growth in the Forecast

Despite questions and uncertainties, the National Retail Federation pointed to expected strength in sales this holiday season. Specifically, NRF stated:

“Holiday spending has the potential to shatter previous records, as the National Retail Federation today forecast that holiday sales during November and December will grow between 8.5 percent and 10.5 percent over 2020 to between $843.4 billion and $859 billion. The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with a previous high of 8.2 percent in 2020 to $777.3 billion and an average increase of 4.4 percent over the past five years.”

Indeed, NRF seemed positively cheery in their outlook, with NRF President and CEO Matthew Shay saying:

“Consumers are in a very favorable position going into the last few months of the year as income is rising and household balance sheets have never been stronger.” And NRF Chief Economist Jack Kleinhenz declared, “The outlook for the holiday season looks very bright.”

Meanwhile, this outlook largely lined up with Deloitte’s forecast that was issued in mid-September. Deloitte is forecasting a 7 percent to 9 percent increase in 2021 holiday sales, compared to a 5.8 percent increase last year, with e-commerce sales predicted to grow by 11 percent to 15 percent, compared to a 34.8 percent jump last year.

An Undercurrent of “Grim” News

But – and this is a big “but” – the latest take on consumer confidence from the University of Michigan, released on November 12, served up some grim news. According to this gauge, consumer sentiment fell to its lowest level in ten years in the early part of November.

Richard Curtin, the chief economist for the Surveys of Consumers, pointed out:

“Consumer sentiment fell in early November to its lowest level in a decade due to an escalating inflation rate and the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation. One-in-four consumers cited inflationary reductions in their living standards in November, with lower income and older consumers voicing the greatest impact. Nominal income gains were widely reported but when asked about inflation-adjusted gains, half of all families anticipated reduced real incomes next year.”

Whether transitory or not, inflation is here, it’s real, and it is cutting into incomes, family budgets, and costs for businesses.

If such sentiment holds in terms of actions in the marketplace, then buoyant optimism about the holiday shopping season would be unwarranted. In the end, as always, small retailers need to work hard and smart in serving customers, and thereby in securing positive holiday shopping sales. Given this year’s challenges, that won’t be easy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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