Deloitte Forecasts Holiday Spending Increase of Up to 4.5% Amid Economic Optimism

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Total retail holiday sales are expected to climb 4.0% to 4.5% this year, according to Deloitte’s annual holiday retail forecast released Wednesday, reflecting a strengthening economy, a robust labor market and optimism among consumers.

Total holiday sales are expected to reach $1.04 trillion to $1.05 trillion between November and January, up from $1.00 trillion in 2016. The surging growth of e-commerce will be one of the drivers of rising sales, as Deloitte predicts online sales will jump 18% to 21%, to $111 billion to $114 billion, from $93.8 billion in 2016.

The optimistic outlook mirrors recent encouraging economic data. The pace of the U.S. economy accelerated to 3% during the second quarter, the fastest pace of growth in two years. The jobless rate slid to a 16-year low of 4.3% in July, and the economy has been generating jobs at a clip of more than 180,000 a month. Consumer confidence in August rose to its highest level since January, according to economists surveyed by Reuters.

And Americans are feeling wealthier as homes have regained the values lost during the housing downturn, and the stock market reached another all-time high on Tuesday.

While economic fundamentals remain positive, Deloitte economist Daniel Bachman cited potential uncertainties that could affect income growth and bring the forecast in at the lower end of the range, such as an increase in the savings rate that would cause spending to expand more slowly. The impact of the unusually active hurricane season remains too early to project, as it could depress discretionary spending in affected areas in the South. However, spending on home building likely will surge to repair homes damaged by Hurricanes Harvey and Irma in Texas and the southeast United States.

“Sentiment and spending indicators are firing on all cylinders, but the question is: How will retailers respond given the profound disruption across the industry?” said Rod Sides, vice chairman, Deloitte, and U.S. retail and distribution sector leader. “The good news is retail is thriving, and it is the proliferation of new, niche retailers that is resulting in share constantly changing hands. These disruptive factors are likely to combine to create a highly competitive and promotional holiday season.”

Target plans to hire 100,000 temporary workers for the holiday season, compared with 70,000 last year. Arts and crafts company Michaels and 1-800-Flowers also announced plans to add workers this holiday season. But Walmart said Wednesday that it won’t hire temporary workers for the holidays but instead will offer more hours for current employees.