By Thomas J. Ryan

<span style="color: #999999;">Surveys from Deloitte and AlixPartners both forecast that holiday spending this year will easily surpass holiday 2018 results. A strong U.S. job market is expected to offset the threat of an economic slowdown and any fallout from the trade war with China.

Deloitte sees U.S. retail sales surging between 4.5 percent and 5 percent during the November to January time frame as retailers rake in $1.1 trillion in sales. Last holiday season, retail sales rose 3.1 percent on $1.09 trillion of sales, according to the Census Bureau.

“The projected holiday season growth is, in part, due to the current health of the labor market,” said Daniel Bachman, Deloitte’s U.S. economic forecaster, in a statement. “Near record-low unemployment rates, coupled with continued monthly job creation, may encourage people to spend more during the holiday season. The economy is still growing, albeit at a slower rate. Additionally, we continue to see consumer confidence elevated, which also helps boost holiday spending.”

The U.S. unemployment rate in August held at 3.7 percent, near a 50-year low, as average hourly wages rose at a 3.2 percent year-over-year pace. The U.S. economy grew at a 2 percent rate in the second quarter, albeit down from 3.1 percent in the first quarter. U.S. consumer confidence also beat expectations in August, allaying fears that continuing tariffs would result in disappointing holiday sales.

Deloitte also implied a generally healthier retail environment would help drive spending.

“Based on growth in consumer disposable income and spending indicators, retailers, across channels, should expect a strong holiday season in 2019,” added Rod Sides, vice chairman, Deloitte LLP and U.S. retail and distribution sector leader. “We’ve seen retailers continue to improve customer experience, invest in the fundamentals and leverage relationships with innovative startups to boost engagement and efficiency. But, convenience is the new retail currency; retailers who offer seamless experiences, have products available, and can deliver items more quickly than ever, are most likely to win this holiday season.”

In its statement, Deloitte noted that the more modest growth seen in the 2018 holiday selling season was due to a December shortfall. Deloitte said three factors—the government shutdown, an uptick in consumer savings and a sharp stock market decline —may have led to lower-than-expected growth in December 2018.

The NRF, the retail industry’s leading trade organization, had expected sales to expand 4.8 percent for the 2018 holiday season.

Deloitte also forecasts that e-commerce sales will grow by 14-to-18 percent year-over-year, during the 2019/20 holiday season, compared to sales increasing by 11.2 percent in 2018. The robust growth will likely result in e-commerce holiday sales reaching between $144–149 billion this season.

AlixPartners, also a consulting firm, likewise delivered a bullish forecast calling for an increase of 4.4 percent to 5.3 percent for the traditional November-through-January period, although they offered more caution on their predictions.

“‘Unprecedented uncertainty’ might be the best term to use to characterize this upcoming holiday season,” said Joel Bines, global co-leader of the retail practice at AlixPartners and a managing director at the firm. “From on-again, off-again tariffs, to a growing chorus concerned about a recession, a looming election and geopolitical uncertainty, this season is unlike any in recent memory. While our forecast is bullish, we are nevertheless advising clients to be nimble. These are uncharted waters, and the best course to set is one that includes strong cost control and flawless execution.”

Roshan Varma, a director in the retail practice at AlixPartners, added: “Holiday sales the past five years have been like a bouncing ball—up one year and down the next; however, just like a bouncing ball, each rise has been lower and lower. Therefore, the question for retailers this holiday season is whether they can crowd out all the uncertainty, connect with their customers in an engaging manner and deliver on ROI targets.”

Deloitte’s and AlixPartners’ forecast comes a little more than a month after the U.S. Office of the Trade Representative said it would delay tariffs on certain Chinese goods, cell phones, laptop computers, video game consoles, toys, computer monitors, kitchen items, sports equipment, footwear, and clothing until December 15, after the majority of holiday shopping is completed.

“We’re doing this for Christmas season, just in case some of the tariffs would have an impact on U.S. customers which, so far, they’ve had virtually none,” President Trump told reporters. “They won’t be relevant to the Christmas shopping season,” he said.

The upbeat forecasts also come after several major chains, including Target and Walmart, lifted their outlook for the year following the delivery of healthy second-quarter results.

The National Retail Federation’s (NRF) holiday forecast traditionally comes out in early October. The organization predicted earlier in the year sales growth of 3.8 percent to 4.4 percent for the full year.

Other early holiday forecasts include:

  • Wells Fargo senior analyst Ike Boruchow in a note in late August said he is “quite bearish” on holiday sales despite a number of retailers raising their guidance. Factors that could hold back holiday gains, according to the analyst, include six fewer days between Thanksgiving and Christmas this year, an expected warmer winter following two straight cold winters, less tourism spending due to the strengthening dollar, and high inventories in part due to tariffs.
  • A recent survey of 2,500 consumers from the U.S., U.K., France, and Germany from Bazaarvoice, which provides technology supporting product reviews and user-generated content (UGC), found shoppers continuing to shop earlier into the summer and fall for holiday gifts. Almost 20 percent had started their shopping as early as mid-summer during “Black Friday in July” sales, while 29 percent will get a head start in early fall. Black Friday still dominates the shopping season, with the majority of consumers (37 percent) saying they will complete the bulk of their holiday shopping that day, followed by Cyber Monday (19 percent).