Despite the relatively sluggish overall pace of retail sales growth, data issued by the National Retail Federation (NRF) this week points to annual retail sales gains for the 2014 holiday season.
Holiday sales—as defined by the NRF—are sales in the months of November and December and exclude autos, gas, and restaurant sales. For 2014, the NRF said it expects holiday sales to grow 4.1 percent compared to 2013 to $616.9 billion, which is above the actual 3.1 percent for 2013.
The NRF said that holiday sales have grown by an average of 2.9 percent over the last ten years, which includes its 2014 projection, and are pegged to account for 19.2 percent of the retail sector’s $3.2 trillion in 2014 annual sales, and if the 4.1 percent 2014 annual increase is reached, it would mark the first time holiday sales have headed up more than 4 percent annually since 2011.
The NRF’s holiday sales forecast, according to the organization, is based on an economic model that uses several different types of indicators, including consumer credit, disposable personal income, and previous monthly sales releases
“Though we have only seen consumer income and spending moderately – and erratically – accelerate this year, we believe there is still room for optimism this holiday season,” said NRF Chief Economist Jack Kleinhenz in a statement. “In the grand scheme of things, consumers are in a much better place than they were this time last year, and the extra spending power could very well translate into solid holiday sales growth for retailers; however, shoppers will still be deliberate with their purchases, while hunting for hard-to-pass-up bargains.”
NRF’s forecast comes at a time when the organization says consumer confidence has been unstable for most of 2014, while there have also been improvements in recent months, too, for things like retail sales, jobs, and housing data, that it said could pave the way for increased holiday spending by consumers.
Even with the NRF’s ambitious 2014 holiday sales projection, recent data from investment firm Stifel Nicolaus noted that the U.S. consumer is still recovering as adjusted retail sales are only back to March 2000 levels.
Stifel Nicolaus analyst John Larkin said at last April’s NASSTRAC conference that it is reasonable to expect retail sales to be somewhat tempered as a large amount of U.S. consumers are still recovering from the Great Recession. He supported that thesis by explaining that housing is at about 40-to-45 percent of the peak levels from January 2006, coupled with a year-to-date decline in automobile sales although production is up.
Another widely reported metric that could deter retail sales growth centers around the lack of meaningful wage inflation, which was exemplified in a New York Times report this week that observed the typical American family makes less than the typical family did 15 years ago, something which has not occurred since the Great Depression.
The report added that even unemployment rate has decreased in recent years, wage growth is still weak, as the jobless rate is now below 6 percent, but hourly pay has risen by 2 percent over the last year, which is not much faster than inflation.
But even with this situation, industry estimates suggest that Peak Season imports in 2014 are expected to be in the low to mid single digit range, according to KeyBanc Capital Markets analyst Todd Fowler. This forecast could subsequently lead to decent holiday sales numbers, as the NRF is expecting.
This was also supported by the findings of a recent Logistics Management reader survey that found that there is increased optimism towards a 2014 Peak Season.
The survey, which polled 103 buyers of domestic and global freight transportation and logistics services, found that 68.1 percent expect a more active Peak Season compared to 2013, with 25.0 percent expecting it to be the same, and 6.9 percent calling for it to be less active. The optimism was apparent considering that in 2013 barely more than half of the survey’s respondents, at 51.1 percent, expected a more active Peak Season.
The most recent edition of the North America Port Tracker report issued by the NRF and maritime consultancy Hackett Associates, which issues data based on import volumes to a number of U.S.-based retail container ports, called for November to come in at 1.39 million TEU for a 3.8 percent annual increase and for December to hit 1.37 million TEU, which would be up 4.1 percent. Both of these numbers ostensibly match up well with the NRF’s holiday sales projection.