NRF Optimistic About Holiday Spending

Consumer Is A Mystery

Undoubtedly, this is the hardest holiday shopping season to predict ever. Normally, retail sales are hard to predict, but usually, it’s not difficult to get within a couple of percentage points of the result. This current season is an order of magnitude tougher. 

As a hypothetical, if someone predicted 3.5% growth and it came out at 5%, that would be a decent-sized miss in a normal year. You want to predict within 0.5% which is tough. This time, if you get within 2%, it’s a victory. Obviously, as the season goes on, the predictions get easier because you have more data. We're talking about making your guess before Black Friday.

As you can see from the chart above, the 7-day average in growth of retail and recreation spending from the baseline in March has declined incrementally in America in the past few weeks. There were major step changes in the U.K. and France which had lockdowns because of their uncontrolled COVID-19 outbreaks. Shutdowns allowed Europe to go from exponential growth in cases to declines. The cost was a weak economy for a few weeks.

Obviously, that’s not the only cost. Shutdowns will lead to lasting financial, health, and psychological damage to citizens. In other words, there is no winning formula. COVID-19 will cause health and economic damage no matter what policy is pursued. America avoided the retail sales decline, but its outbreak is still a big problem. The good news is there are early signs of it being controlled within the next few weeks. The growth rate is slowing and the positive rate is falling.

It was shocking to see the National Retail Federation predicted holiday sales to rise 3.6% to 5.2%. Trade group usually releases its prediction in early October. This time, it waited until November 23rd because of COVID-19 related uncertainty. Maybe the trade group saw positive signs 6 weeks ago but didn’t want to get caught being too optimistic. The situation is a little clearer now in that we see the early effects the virus is having on the consumer. 

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