Deloitte Also Predicts a Happy Holiday for Retailers
Holiday retail sales are forecast to grow between 7 and 9 percent, as per the firm’s annual forecast.
The financial services company expects 2021 holiday retail sales to increase between 7 and 9 percent, a very merry forecast that comes on the heels of a similar prediction from Mastercard SpendingPulse.
A rise in vaccination rates is bringing consumers out of the house and into stores and restaurants, boosting spending on services while spending on goods remains steady, said Daniel Bachman, Deloitte’s U.S. economic forecaster, in a press release about the forecast.
“A steady decline in the savings rate to pre-pandemic levels will support consumer spending and keep retail sales elevated this season,” he said.
Consumer spending strength will carry over to online shopping as well, with holiday e-commerce sales expected to grow between 11 and 15 percent.
E-commerce sales are expected to total $210 billion to $218 billion.
“Retailers who remain resilient to shifting consumer behaviors and offer convenient options for online and in-store shopping … will be poised for growth this holiday season.”— Rod Sides, Deloitte
This year’s merry holiday season follows last year’s strong season, reflecting continued growth in sales.
Holiday 2020 sales were higher than expected, up nearly 6 percent year-over-year, totaling $1.19 trillion, as per the U.S. Census Bureau.
Last year, e-commerce sales grew nearly 35 percent to $189 billion.
“The 2021 forecast projects a strong growth rate amid already elevated retail sales and growth in disposable personal income that is likely to remain flat heading into the season,” said Deloitte.
The Delta variant and pandemic-related uncertainty could lead to more spending on goods, the company also noted.
“While consumer concerns about health and safety have eased since the last holiday season, pandemic-influenced shopping behaviors continue to gain traction,” said Rod Sides, vice chairman, Deloitte LLP and U.S. retail and distribution sector leader.
“Retailers who remain resilient to shifting consumer behaviors and offer convenient options for online and in-store shopping, as well as order fulfillment, will be poised for growth this holiday season, and into the new year.”
A strong holiday season may seem questionable, particularly when considering U.S. consumer confidence fell to a seven-month low in September as COVID-19 infections continue to rise, marking the third consecutive monthly decline and the lowest level since February.
However, National Retail Federation Chief Economist Jack Kleinhenz remains hopeful for the holidays, as he takes other factors into consideration.
“With consumer spending accounting for roughly two-thirds of U.S. gross domestic product, all eyes are closely watching shoppers’ ability to drive the economy,” said Kleinhenz.
“If consumer finances are any indication, there’s reason to be optimistic: Households remain in good shape, with consumers in the aggregate actually underspending relative to current income.”
While enhanced unemployment benefits have expired, that loss may be offset by an uptick in savings since the start of the pandemic, he said.
There hasn’t been much to celebrate on the economic front in recent months, as COVID-19 cases went from record lows in the early summer to a six-month high by September, straining health care systems in hard-hit states.
August payroll numbers were bleak, up 235,000 jobs nationwide, down from a gain of 1.1 million the month before.
And last month, the Federal Reserve lowered its forecast for gross domestic product growth for the year to 6 percent from 7 percent, and expects unemployment to end the year at 4.8 percent rather than 4.4 percent.
“There’s a saying that you should never underestimate the American consumer—and its corollary is that you should watch what consumers do, not what they say.” — Jack Kleinhenz, NRF
The Consumer Price Index showed inflation was up 5 percent year-over-year in August, due to consumer demand and supply chain disruptions.
To add to that, the University of Michigan Index of Consumer Sentiment fell to 71 in September, below its pandemic high of 88.3 in April, marking the lowest confidence level since the start of the pandemic.
The Conference Board’s consumer confidence index experienced a similar drop.
In spite of all this, August retail sales still rose, up 2 percent month-over-month and 12 percent year-over-year.
The October issue of the NRF’s Monthly Economic Review showed consumers’ mid-summer savings rate of 10 percent exceeded pre-pandemic levels, noting that strong employment gains, higher wages, and the Child Tax Credit would boost income growth going forward.
“That strong momentum shows there’s a big disconnect between consumer confidence and consumer spending at the moment and that the downdraft in confidence may well be a false scent,” Kleinhenz said.
“There’s a saying that you should never underestimate the American consumer—and its corollary is that you should watch what consumers do, not what they say.”
While August job gains missed the mark, wages grew more than 4 percent year-over-year with job openings at a record high of 10.9 million at the end of July.
The numbers show that demand for labor is still strong, said Kleinhenz, and that a lack of workers rather than a lack of jobs is the impediment to hiring.
“With the end of supplemental unemployment benefits taking away financial incentives to stay home and the reopening of schools easing child care responsibilities for parents who want to get back to work, stronger growth should be on its way.”
While some economists believe financial incentives have kept people from working, others point to a lack of childcare and low wages as well as some workers retiring early or looking for a new career path.
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