Consumers' Willingness to Spend Drives Holiday Retail Sales Forecast 

The National Retail Federation (NRF) on Monday released its sales estimate for the 2020 holiday season. The retail industry association expects a year-over-year increase of 3.6% to 5.2% in holiday retail sales, slightly better than the five-year average of 3.5% annual growth.

2020 sales are forecast to range from $755.3 billion to $766.7 billion for the November-December season. The NRF does not include auto, gasoline or restaurant sales in its estimate.

NRF President and CEO Matthew Shay noted that this holiday season “will be unlike any other” and that retailers have made huge investments to ensure a safe and healthy shopping experience for staff and customers: “Consumers have shown they are excited about the holidays and are willing to spend on gifts that lift the spirits of family and friends after such a challenging year. We expect a strong finish to the holiday season ….”

Online and other nonstore sales are tabbed to rise between 20% to 30% this year to a range of $202.5 billion to $218.4 billion. The total for 2019 was $168.7 billion. The NRF notes that online sales in the third quarter of this year were up by 36.7% year over year.

Chief Economist Jack Kleinhenz added:

Given the pandemic, there is uncertainty about consumers’ willingness to spend, but with the economy improving most have the ability to spend. … After all, they’ve been through, we think there’s going to be a psychological factor that they owe it to themselves and their families to have a better-than-normal holiday.

Kleinhenz pointed to strong household balance sheets, a strong stock market, rising home values and record savings as reasons for optimism. The NRF calculates that retail sales in the first 10 months of the year have increased by 6.4%, compared with 2019 sales for the same period. Sales in October were up 10.6% year over year, according to the group’s calculations.

Not every observer is as upbeat as the NRF. Deloitte, for example, expects holiday spending to rise by 1.0% to 1.5% this year to more than $1.15 trillion. E-commerce sales are expected to rise to between $182 billion and $196 billion. Last year, Deloitte forecast year-over-year holiday spending growth of between 4.5% to 5.0%.

Deloitte actually projected two scenarios for this year. The low-growth (flat to up 1%) outlook was based on lower consumer confidence due to expiring unemployment benefits, school closures and lack of a vaccine against COVID-19. A higher growth scenario (up 2.5% to 3.5%) included a boost to consumer confidence driven by a second federal emergency relief bill that extends unemployment benefits and the development of an effective vaccine. At least one of those criteria appears to be in place.