New York: Americans will spend at a slower pace than last year during the crucial winter holidays because of sluggish wage growth and other factors, the largest US retail trade group says.
The National Retail Federation predicted Thursday that holiday spending will rise 3.7 per cent to $630.5 billion, slower than the 4.1 per cent increase during last year’s November-December period.
It would mark the first slowdown since 2012, when retailers were hurt by Super Storm Sandy, which disrupted households and businesses for months, as well as other distractions like a stalemate in Congress.
The last two months of the year are key because they account, on average, for nearly 20 per cent of annual retail industry sales. And the NRF’s figure offers some insight into the mindset of the consumers, whose spending makes up about 70 per cent of economic activity.
While the holiday sales estimate is slower than last year, it is still much higher than the 10-year average of 2.5 per cent. Growth has been choppy since the deep downturn of 2008, when holiday sales fell 4.6 per cent.
“Americans remain somewhat torn between their desire and their ability to spend,” said Matthew Shay, CEO and president of the group in a release.
Shoppers are faced with mixed messages. The US economy looks healthy, and consumer confidence is at the highest level since January. But investor concerns about an economic slowdown in China, the world’s second largest economy, and other emerging markets have caused turmoil in the financial markets. While US unemployment has dropped to a seven-year low of 5.1 per cent, there are concerns that employers have cut back on hiring. Hourly wages haven’t kept up with higher daily costs.
The NRF said it also took into account potential disruptions from a possible government shutdown in mid-December that could hurt spending.
Against that economic backdrop, there are shifts happening in retail. Shoppers are moving away from purchases of clothing and other traditional merchandise and more toward experiences like spas, concert tickets or big ticket necessities like cars.
And online shopping continues to grow. The NRF estimates that online spending should be up 6 to 8 per cent for the two-month period to as much as $105 billion. Online sales grew 5.8 per cent in last year’s holiday season.
The overall holiday estimate includes online sales but excludes sales from autos, gas and restaurants.
PwC US, an advisory firm, included spending on experiences like concert tickets and travel for the first time this year, highlighting people ages 25 to 35, who they estimated will spend 52 per cent of their holiday spending on experiences, according to its survey of 2,000 shoppers. That compares with 24 per cent for older shoppers.
Steve Barr, PwC’s US retail and consumer leader, also believes the divide between the haves and have-nots continues to widen. Based on the survey, PwC found those who make more than $50,000 a year said they plan to spend an average of $1,331, which is more than they did a year ago.
But those who make under $50,000 plan to spend an average of $681 for the holidays, less than a year ago, and will focus on deals.
“Especially for the survivalist shopper, it’s going to be very hard for retailers to pull back from promotions and deals,” Barr said. “We’ve permanently conditioned the consumer.”
