When it comes to the task of forecasting what the holiday shopping season will hold for America’s retailers, the man who routinely takes up that job says it may be harder than ever this year due to some considerable wild cards in the mix due to the pandemic.
While consumer spending has recovered from the coronavirus pandemic more quickly than expected, National Retail Federation Chief Economist Jack Kleinhenz says that forecasting 2020 holiday sales is like assembling a jigsaw puzzle without all the pieces.
Kleinhenz says, “Completing a puzzle is highly probable given patience, having all the pieces and having the picture on the box to guide assembly, but it’s not the same when attempting to fit pieces of the economy together in today’s environment. Many of the pieces are missing.”
By way of explanation, Kleinhenz says, “We are waiting for new data and are still assembling puzzle pieces for the 2020 holiday season.” Nevertheless, he suggests, “I am cautiously optimistic about the fourth quarter in terms of the economy and consumer spending, but the outlook is clouded with uncertainty pivoting on COVID-19 infection rates. The recession appears to be behind us and the re-opening of the economy over the past several months has created momentum that should carry through the fourth quarter. The test is whether consumer spending will be sustained amid wildcard puzzle pieces including policy surprises, the election and a resurgent virus.”
Kleinhenz’s remarks came in the October issue of the National Retail Federation’s Monthly Economic Review, which says consumer spending has seen a clear V-shaped recovery thanks in part to $1,200 stimulus checks issued this spring and enhanced benefits for the unemployed. However, both government programs have ended, only about half of the 22.2 million jobs lost in March and April have been replaced and full economic recovery is not likely before 2022, according to the report.
If there should be a second wave of COVID-19 and Congress fails to provide new fiscal support, there could be an “economic speedbump” resulting in slower spending growth or even a contraction in spending, according to Kleinhenz’ research.
Despite that warning, he tells us there is “solid evidence that signals a better-than-expected outcome” through the just-ended third quarter. Retail spending and housing have both recovered strongly, with home sales spurred by low interest rates boosting sales at home improvement, furniture and appliance retailers. Employment growth is slowing but remains positive, and consumers have saved a portion of their stimulus checks and unemployment benefits. Consumer confidence remains below pre-pandemic levels but is improving, with households upbeat about both current conditions and future expectations.
The report comes as the National Retail Federation launched a New Holiday Traditions campaign, encouraging consumers to shop safe and shop early this year to avoid overcrowding stores and to take advantage of early holiday discounts.
The National Retail Federation, the world’s largest retail trade association, advocates for the people, brands, policies and ideas that help retail thrive. From its headquarters in Washington, D.C., the federation empowers the industry that powers the economy. Retail is the nation’s largest private-sector employer, contributing $3.9 trillion to annual GDP and supporting one in four U.S. jobs — 52 million working Americans. For over a century, NRF has been a voice for every retailer and every retail job, educating, inspiring and communicating the powerful impact retail has on local communities and global economies.