By Brecken Branstrator
The National Retail Federation is estimating holiday retail sales growth of between 3.6 and 4 percent in November and December.
Washington--Talk about the 2017 holiday season has officially begun, and if the National Retail Federation’s prediction holds true, it could be a good one for retailers.

The trade association released its holiday sales forecast Tuesday morning, stating that it expects retail sales in November and December--excluding automobiles, gasoline and restaurants--to increase between 3.6 and 4 percent for a total of $678.75 billion to $682 billion.

Such growth would meet or exceed last year’s increase of 3.6 percent and the five-year average of 3.5 percent.

(This is the first time the NRF has announced the forecast as a range rather than as a single fixed percentage, which it said was due to the recent hurricanes. While they are not expected to have a significant long-term effect on the economy, the association said they still have had enough of an impact on economic indicators to make it difficult to make a more precise forecast.)

The estimated growth for the 2017 holiday season was based on a number of factors, beginning with the strength of the economy.

NRF President and CEO Matthew Shay said on a conference call Tuesday morning that while the recent economic growth of about 2 percent is “not as robust” as they’d like to see, it still has been a solid performance. He added that it continues to expand at a steady-but-modest pace.

Chief Economist Jack Kleinhenz echoed these sentiments, noting that while unemployment and consumer spending will be “clouded” by the effects of the hurricanes, he still expects spending to increase and for there to be continued gains in employment and wages.  

Additionally, Shay referenced the strength of the consumer as one of the reasons for predicted growth in sales:  “We continue to see the consumer doing, really, a substantial portion of the heavy lifting in economic growth by keeping the economy moving forward.”

He cited the fact that retailers are learning how to better connect with consumers across all channels as a third reason for the prediction of a year-over-year sales increase.

Also, because of the way the calendar lines up this year, with Thanksgiving on Nov. 24 and Christmas Day falling on a Monday, there will be an extra weekend in the season for shopping.
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He noted that while the Consumer Sentiment Index showed a slight decline in September after a seven-month high in August, consumer resilience is shown in their willingness to spend and the way they’re accessing credit and taking on debt.

Along with job creation, improved wages and an increase in net worth, these factors are creating conditions for confidence in spending and investing.

Competition and Price Sensitivity
Along with reasons why they expect growth in retail sales during the two-month holiday shopping period, the NRF also spoke about the trends expected to have an impact on the season.

For the past few years, and to no one’s surprise, Shay said they have seen that consumers are different in the post-Great Recession era.

Pricing, Shay said, is a “very significant indicator of spending.”

He added that consumers will be very price sensitive and that they expect it to be a critical factor for consumers as they make decisions about retail spending this holiday season.

And with the level of transparency that exists in the marketplace among competitors and the ability of consumers to “price shop” instantaneously, retailers will need to keep an even closer eye on each other’s promotions and offers, and on consumer shopping behaviors, so they can best deliver the product at the right prices and on the right channels.

This has to happen because, ultimately, the consumer will stay “pragmatic, looking for value, looking for price and certainly looking for convenience,” Kleinhenz said.

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