Daily Spotlight: Checking Our List: Holiday Sales May Rise 3%

Summary

We expect holiday retail sales to rise about 3% this year to almost $1 trillion. Our experience is that when U.S. consumers are employed, they go out of their way make the season special. We believe the Fed’s 50-basis-point rate cut last month, unemployment’s downtick to 4.1%, and the potential for 3% GDP growth in 3Q are catalysts to make the season bright. The average annual sales gain during the past 20 holidays has been 4%, with a 3.8% increase last year and a high of 12% in the pandemic-recovery year of 2021. The only decline, of 4.7%, came as the economy entered a deep recession in 2008. We calculate holiday sales the same way the National Retail Federation does, based on the year-over-year change in the Commerce Department’s Retail Sales data for the combined months of November and December. Like the NRF, we exclude sales at gas stations, car dealers, and restaurants — and focus on core retail. There are three categories that represent two-thirds of holiday-season sales and drive our forecast: grocery stores, general merchandise stores, and e-commerce. Our forecasts for those categories are +2%, +3%, and +6.5%, respectively. Why is our forecast slightly below the historical average in a strong economy? Retail sales have a heavy weighting in non-durable goods, which has not been a blockbuster category, declining 0.8% in the 1Q GDP report and rising only 1.7% in the 2Q report. As well, a lot of the strength in both GDP and consumer spending has been in s