Economy Watch: The Skinny on Holiday Spending

By Dees Stribling, Contributing Editor

Though the holiday season might still seem a little remote, that’s not the case for the retailers of the nation, who are busy preparing for the season upon which retail bottom lines depends, and indirectly the health of retail real estate. Overall, holiday sales in 2015 are expected to represent about 19 percent of the retail industry’s annual sales of $3.2 trillion. Will it be a strong season? The National Retail Federation said yes and no. On Friday the organization said that it expects sales in November and December (not counting autos, gas and restaurant sales) to increase a solid 3.7 percent to $630.5 billion, which is higher than the 10-year average of 2.5 percent.

A solid increase, but not as strong as last year’s, which was 4.1 percent, though better than in either 2012 or ’13, when growth was 2.7 percent. According to NRF chief economist Jack Kleinhenz, a number of factors seem to be holding down this year’s growth rate: slower job growth in 2015, deflationary retail prices, and the consumer spending shifting somewhat toward big-ticket items and services. NRF’s holiday sales forecast is based on an economic model using several indicators, including consumer credit, disposable personal income and previous monthly retail sales releases. It includes the non-store category, such as direct-to-consumer, kiosks and online sales. As it happens, the NRF is forecasting that online sales will increase between 6 percent and 8 percent for this holiday season compared with the last, to as much as $105 billion.

The Christmas season isn’t the only upcoming holiday that will spur retail spending. NRF also predicted that the average American celebrating Halloween will spend $74.34 this year, compared with $77.52 last year, with total spending on Halloween expected to reach $6.9 billion. When it comes to how consumers plan to celebrate, most will hand out candy (67.8 percent), or dress in costume (43.5 percent), though there will be no shortage of jack-o-lanterns this year, with 41 percent of people planning to carve pumpkins. Nearly one-third of consumers (31.5 percent) plan to throw or attend a party with friends and family.

In a separate recent report on U.S. holiday spending patterns at the end of 2015, PricewaterhouseCoopers argued that Millennials are the “retail prize” for the holiday season, with 47 percent of the age group between 18 and 34 planning to spend more than they did last year, compared with 25 percent of older shoppers. But there’s a catch: PwC predictes that a lot of Millennial spending this year won’t go toward traditional holiday categories like apparel or consumer electronics. Rather, the group plans to spend 52 percent of its holiday dollars on experience-related purchases, such as travel and entertainment, while only 39 percent of older shoppers will do that.