Elgin Area Chamber Of Commerce: National Retail Federation Forecasts Record Holiday Spending This Year, Up 10.5%

Press release from the Elgin Area Chamber of Commerce:

October 28, 2021

The National Retail Federation is predicting that U.S. holiday spending will be the highest ever on record, rising as much as 10.5%. (Getty Images)
 

By Linda Moss
CoStar News

Despite gloomy predictions about the impact of supply-chain bottlenecks, the National Retail Federation is predicting U.S. holiday spending will be the highest ever on record, rising as much as 10.5%.
 

The retail industry is moving into the holiday season with strong momentum, with sales in the first nine months of 2021 up 14.5% year over year, NRF President and CEO Matthew Shay said during a conference call with the media. In 2020, retail sales increased for the entire year by almost 7%, according to Shay.

“It’s our belief and expectation that consumers are going to continue that energy for the rest of this year,” he said.

NRF released its holiday forecast Wednesday, saying it expects sales during November and December will increase between 8.5% and 10.5% over 2020 to between $843.4 billion and $859 billion. Those predictions — which exclude automobile dealers, gasoline stations and restaurants — compare with a previous high of 8.2% in 2020, to $777.3 billion, and an average increase of 4.4% over the past five years.

NRF, which is based in Washington, D.C., and bills itself as the world’s largest retail trade association, expects that online and other nonstore sales, which are included in the total, will increase between 11% and 15% to between $218.3 billion and $226.2 billion, driven by online purchases. That number would be up from $196.7 billion in 2020.

The forecast comes in the wake of recent rosy predictions about holiday spending in the year following the peak of the pandemic from real estate firm JLL and retail real estate trade group ICSC. The brokerage said consumers will spend about 25% more this year, while ICSC sees holiday sales rising about 9%.

All of the forecasts cited the COVID-19 outbreak no longer putting a crimp on in-store shopping and the benefit of Americans receiving federal stimulus checks that have helped them pay off credit card debt as factors boosting the holiday season. And all three forecasts said they expect consumers to shop earlier this year in order to get the gifts they are seeking, in October, in anticipation of inventory shortages retailers may face due to international supply-chain holdups.

Shoppers Back in Stores
NRF acknowledged the retail industry faces issues such as supply-chain backups, labor shortages, rising inflation and the backdrop of the pandemic. But retailers are prepared, making significant investments in their supply chains, spending heavily to ensure they have products on their shelves and bolstering their digital channels, according to the trade group.

“Despite some of the photos that we’ve seen and some of the hyperbolic statements made about supply-chain challenges … [retailers] are prepared for the holiday season,” Shay told reporters. “They do have and will have the holiday inventory in place and be prepared to meet consumer needs.”

While e-commerce will remain important, households are also expected to shift back to in-store shopping and a more traditional holiday shopping experience, according to NRF.

“Consumers are ... actually back in stores, there is foot traffic,” Shay said during a question-and-answer session.

The entire retail industry is much healthier than it was a decade ago following a shakeout, according to Shay. In 2010 and 2011, there were about 400 retail bankruptcies in each of those two years, while in 2021 there were only 75, with most of them reorganizations, he said. So retailers are in a better position to meet the needs of consumers, he said.

While it appears new COVID-19 infections and hospitalizations are down, a variant surge could potentially sidetrack the current trajectory of spending, according to NRF. But strong household fundamentals provide optimism amid the uncertainty, with household wealth reaching a record high, according to NRF Chief Economist Jack Kleinhenz.

NRF expects retailers will hire between 500,000 and 665,000 seasonal workers. That compares with 486,000 seasonal hires in 2020. Some of this hiring may have been pulled into October as many retailers encouraged households to shop early to avoid a lack of inventory and shipping delays, according to the trade group. With the earlier start, retailers have already announced thousands of open positions in brick-and-mortar stores and warehouse and distribution centers.

NRF said its holiday forecast is based on economic modeling that considers a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit, previous retail sales and weather. NRF defines the holiday season as Nov. 1 through Dec. 31.

Source: CoStar Group, www.costar.com

This press release was produced by the Elgin Area Chamber of Commerce. The views expressed here are the author’s own.