Tariffs cast shadow over strong U.S. holiday sales forecast

By

Robin Driver

Published
Oct 4, 2019

The National Retail Federation (NRF) Holiday Forecast expects U.S. holiday sales to rise between 3.8% and 4.2% year over year in 2019, an increase driven by strong consumer spending power but threatened by ongoing economic uncertainty.
 

In line with this predicted growth, retail sales, excluding automobile dealers, gasoline stations and restaurants, are expected to total between $727.9 billion and $730.7 billion in November and December.
 
Online and other non-store sales are expected to experience particularly strong growth, increasing between 11% and 14% to total between $162.6 billion and $166.9 billion.

The numbers in NRF’s forecast represent an above-average jump in overall holiday sales, as over the past five years the total has increased an average of 3.7% year over year.
 
It’s worth noting, however, that 2018 saw a particularly low rise of 2.1%, leading to total holiday sales of $701.2 billion. At the time, sales were impacted by a range of issues, including the government shutdown, an erratic stock market and tariffs.

For this reason, as the final months of 2019 begin to look like an equally bumpy ride, NRF’s analysts are cautious in their optimism.
 
While highlighting promising consumer spending trends, the forecast also pointed out that it is difficult to know at this point exactly what effect new tariffs will have on holiday sales, either directly or through their impact on consumer confidence.
 
Apparel and footwear, both common holiday purchases, are subject to new tariffs that came into effect on September 1, with further duties set to be applied to a range of other goods on December 15.
 
On top of this, after the WTO ruled in favor of the U.S. in a dispute with the EU over aviation subsidies on Wednesday, Washington has released a new list of tariffs for products imported from the European bloc. If approved in a meeting with the WTO on October 14, the new duties will come into effect later this month.
 
NRF explained that although retailers are employing a range of tactics in an attempt to limit the effect of these tariffs on consumers, some – especially small businesses – have already had no choice but to raise their prices.
 
And consumers are well aware of the impact the new duties might have on their pockets, with 79% of those surveyed for NRF in September saying that they were concerned that tariffs will result in higher prices, worries that could well impact their shopping strategies during the holidays.
 
“There are probably very few precedents for this uncertain macroeconomic environment,” commented NRF’s chief economist, Jack Kleinhenz, in a release.

Nonetheless the analyst remains relatively confident in this holiday season’s positive forecast.
 
“There is significant economic unease, but current economic data and the recent momentum of the economy show that we can expect a much stronger holiday season than last year. Job growth and higher wages mean there’s more money in families’ pockets, so we see both the willingness and ability to spend this holiday season,” he concluded.
 
The NRF Holiday Forecast is based on a range of indicators, such as employment, wages, consumer confidence, disposable income, consumer credit and previous retail sales.