Holiday sales expected to increase 3.6% to 4% this year

With unemployment low and consumer confidence high, holiday retail sales for November and December are estimated to increase 3.6 percent to 4 percent to $682.0 billion, up from $655.8 billion in 2016, according to the National Retail Federation.

The NRF — the industry's largest trade group — announced its forecast Tuesday that  for the first time used a range in percentage growth, noting that the recent hurricanes in the South would likely impact the second-half retail-sales data. The $682 billion figure excludes automobiles, gasoline, and restaurants.

"Our forecast reflects the very realistic, steady momentum of the economy and overall strength of the industry," NRF president and chief executive officer Matthew Shay said in a conference call with retail reporters. "Although this year hasn't been perfect, especially with the recent devastating hurricanes, we believe that a longer shopping season and strong consumer confidence will deliver retailers a strong holiday season."

Shay said Christmas would fall 32 days after Thanksgiving this year, one more day than last year, and would be on a Monday, giving consumers an extra weekend day to complete their shopping.

This year's forecast would meet or exceed last year's growth of 3.6 percent and the five-year average of 3.5 percent.

"Consumers continue to do the heavy lifting in supporting our economy, and all the fundamentals are aligned for them to continue doing so during the holidays," NRF chief economist Jack Kleinhenz said. "The combination of job creation, improved wages, tame inflation, and an increase in net worth all provide the capacity and the confidence to spend."

NRF's forecast is based on an economic model using several indicators, including consumer credit, disposable personal income, and previous monthly retail sales. The overall number includes the non-store category (direct-to-consumer, kiosks, and online sales).

Shay said he expected online sales to increase at a faster clip than in-store sales, up 11 percent to 16 percent this year over last year and reaching about $114 billion.

"This forecast reflects the strength of the economy as a whole," Shay said. "The recent economic growth of 2 percent is notable for its lack of anything spectacular, but the economy is robust, and we look to see it expanding at a steady but modest pace.

"And the current state of retail is in a good place, despite all the gloomy stories," Shay said. "Brick-and-mortar stores have been more effective in doing online, and, likewise, legacy online players are getting better with their brick-and-mortar locations."

With retail employment already up recently, retailers are seeing less of a need to hire seasonal workers for the holidays this year. As part of its forecast, NRF expects retailers to hire 500,000 to 550,000 temporary workers this holiday season, down from last year's 575,000.

Some of the biggest players in the holiday-spending bonanza, such as Macy's, Kohl's, and Best Buy, have already announced that they have started to ramp up staffing.

Macy's, though, announced it would hire 4 percent fewer holiday workers this year than last — reflecting the giant retailer's downsizing of stores the last two years as it shrunk its fleet and focused on growing online sales.

Four area Macy's closed over the summer, including stores at Voorhees Town Center and Neshaminy Mall.

In another break from the past, NRF this year will release spending data Nov. 28, the day after Cyber Monday, instead of the Sunday after Thanksgiving. Shay said that, by doing so, it would allow the NRF to provide a more accurate picture of consumer activity over the entire weekend and incorporate Cyber Monday data into the results.

NRF lists retail as the nation's largest private-sector employer, supporting one in four U.S. jobs, or 42 million working Americans, and contributing $2.6 trillion to the nation's annual gross domestic product.

Kleinhenz said that the current national unemployment rate of 4.4 percent was back to the May 2007 rate, but that it was offset with rising costs in housing and health care's competing for household dollars.

"Postrecession, consumers are looking for value, and pricing wars are expected to be strong this holiday season among retailers," he said. "People have become more pragmatic in their spending. They are looking for value and not loading up on debt."