Forecast: Holiday Sales to Increase 3.6 Percent

The first forecasts for the upcoming 2016 holiday season have been released, and they predict that retailers will enjoy solid sales during the crucial season which can comprise more than 20 percent of a retailer’s annual business, according to the National Retail Federation, the Washington D.C. retail trade organization.

Retail sales during November and December, excluding auto, gas and restaurant sales, will increase 3.6 percent to $655.8 billion, according to the NRF, which released its forecast on Oct. 4. Deloitte, the auditing, consulting and risk management company, forecast that holiday retail sales will increase 3.6 percent to 4 percent, according to a statement released Sept. 21. Retail sales should exceed $1 trillion during the season, said Daniel Bachman, Deloitte’s senior U.S. economist.

"Consumers have ramped up their spending this year on the back of a strong labor market. We also expect slightly higher growth in disposable personal income during the upcoming holiday season compared with last year,” he said.

During a conference call, Jack Kleinhenz, the NRF’s chief economist, also noted that economic indicators support predictions that sales will increase during the holiday despite gloom about the economy. “Certainly there will be some speed bumps that come along,” he said.

But with unemployment low—it is 4.9 percent, according to the Bureau of Labor Statistics—and consumer confidence increasing—it is at the highest level since the recession, according to a Sept. 27 statement from The Conference Board—things look good for the U.S. consumer.

“They have more money in their pockets, but they haven’t over-leveraged themselves," Kleinhenz said.

Kleinhenz also is confident that the economy is in a much stronger position than it was last year when the NRF missed its holiday forecast.

“It would be a different picture if we had higher unemployment. We’ve been adding jobs, we aren’t at a break-out speed, but I don’t see where people are going to fall off of the side of the world and stop spending,” he said.

Last year, the NRF predicted that holiday retail sales would increase 3.7 percent. By the time the season’s last receipts were counted, the NRF announced that 2015 holiday sales had only increased 3 percent. Matthew Shay, the NRF’s president and chief executive officer, blamed the missed forecast on warm weather during the holiday season, inventory issues and retailers offering deep discounts early in the season.

The NRF also forecast sales increases for e-commerce and catalogs during the 2016 holiday season. It is forecast to increase between 7 percent and 10 percent to as much as $117 billion. Deloitte also predicted a robust forecast for holiday e-commerce sales, saying online sales will increase 17 percent to 19 percent, reaching $96 to $98 billion during the 2016 holiday season.