National Retail Federation Increases Forecast Despite Harsh Economy

December 15, 2011 by Douglas A. McIntyre

The National Retail Federation, the association that represents the country’s retail companies, sharply upgraded it forecast of holiday sales. That forecast is still threatened by the faltering economy and, even if it is correct, it threatens consumer activity next year.

The NRF said:

With just ten days until Christmas, the National Retail Federation has revised its holiday forecast upward, expecting holiday sales to rise 3.8 percent this year to a record $469.1 billion. NRF’s initial forecast, announced on October 6, called for anticipated sales growth of 2.8 percent.

The association has the benefit of sales figures for most of the holiday season as it makes its prediction. It also can see forecasts of 15% growth in e-commerce sales for the past two months of the year given by online research firm comScore.

What the NRF prediction does not tell is what the buying spree will do to the economy early next year. Consumers may exhaust their credit lines, and they may find themselves in a weak economy in early 2012. U.S. taxpayers also may not receive the benefit of reduced taxes. Congress could take those cuts away.

American consumers spent as though they had infinite financial resources in 2005 and 2006. They did so because of a strong economy and the large equity surpluses in their home values. The wave of the recession and collapse of the home market crushed that consumer spending activity. It has only now just begun to recover.

But consumer confidence may be under pressure as 2011 ends. The consumer has learned what it is like to be overextended. He may have briefly forgotten — thus the improvement in holiday sales. But it will not take time to remind him if he has drawn too much on his credit, the recession deepens and tax cuts end, which will sap buying power.

It is not the NRF’s job — or comScore’s — to say what the aftereffects of increased holiday spending may be. Anyone who watched the fallout of the 2007 to 2009 recession, though, should be concerned about the state of the consumer next quarter.

Douglas A. McIntyre

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