US holiday retail sales during November and December are expected to increase 3.8-4.2% over last year

US holiday retail sales during November and December are expected to increase 3.8-4.2% over last year

This year's holiday retail sales in the US are expected to increase by between 3.8% and 4.2% over 2018, but consumer confidence could be eroded by trade uncertainty and political rhetoric.

The annual forecast from the National Retail Federation (NRF) predicts retail sales for November and December will reach between US$727.9bn and $730.7bn – up from $701.2bn last year.

The numbers, which exclude automobile dealers, gasoline stations and restaurants, compare with an average holiday sales increase of 3.7% over the previous five years.

"The US economy is continuing to grow and consumer spending is still the primary engine behind that growth," says NRF president and CEO Matthew Shay. "Nonetheless, there has clearly been a slowdown brought on by considerable uncertainty around issues including trade, interest rates, global risk factors and political rhetoric. Consumers are in good financial shape and retailers expect a strong holiday season. However, confidence could be eroded by continued deterioration of these and other variables."

NRF expects online and other non-store sales, which are included in the total, to increase between 11-14% to between $162.6bn and $166.9bn, up from $146.5bn last year.

However, the effect of tariffs on holiday spending – either directly or through consumer confidence – remains to be seen. Some holiday merchandise – including apparel, footwear, and televisions – is subject to new tariffs that took effect 1 September, and other products will have the tariffs applied on 15 December.

Retailers are using a myriad of mitigation tactics to limit the impact on consumers, and the impact will ultimately vary by company and product. Small businesses, in particular, have already been forced to raise prices. Nonetheless, 79% of consumers surveyed for NRF in September were concerned that tariffs will cause prices to rise, potentially affecting their approach to shopping.

"There are probably very few precedents for this uncertain macroeconomic environment," adds NRF chief economist Jack Kleinhenz. "There are many moving parts and lots of distractions that make predictions difficult. 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."

The NRF holiday forecast is based on an economic model that takes into consideration a variety of indicators including employment, wages, consumer confidence, disposable income, consumer credit, and previous retail sales.