Economists paint rosy picture for retail supply chain sectors
Retail supply chain managers are bracing for a heightened frenzy of seasonal shopping this holiday season. According to IHS Markit Associate Director James Bohnaker’s updated Holiday Sales Outlook, “a roaring job market is the gift that keeps on giving."
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Retail supply chain managers are bracing for a heightened frenzy of seasonal shopping this holiday season.
According to IHS Markit Associate Director James Bohnaker’s updated Holiday Sales Outlook, “a roaring job market is the gift that keeps on giving.”
“We expect holiday retail sales to grow 4.4% over last year in 2018, compared with 5.3% growth in 2017,” he says. “Online shopping will take a bigger share of the pie, accounting for 18.9% of holiday retail sales, up from 17.8% last year.
Holiday retail sales are defined as not-seasonally-adjusted November plus December total retail sales excluding automobile dealerships, gasoline stations, and food services. Online holiday retail sales are defined as not-seasonally-adjusted November plus December electronic shopping and mail-order retail sale.
Other key observations:
Job market driving the sleigh
Reliable consumer fundamentals are the key ingredient for a cheerful holiday retail season this year. High employment, rising incomes and elevated consumer confidence are steering the holiday retail outlook steadily forward. The sharp decline in retail gasoline prices in the last few weeks will add to these positives, giving consumers more spending money over the holidays and freeing up a bit more cash for gift buying.
Tax cuts and hurricane rebuilding to provide less lift this year
The initial sugar rush from personal income tax cuts began late last year, as consumers anticipated the benefits of lower tax rates before they went into effect in January. This propelled 2017 holiday sales to the strongest performance since 2005 at 5.3% year-over-year growth, setting a high bar for holiday sales this year. Retail sales in key holiday categories have been soft in recent months, making it unlikely that holiday sales growth will suddenly accelerate in year-over-year terms. Additionally, there will be less hurricane rebuilding taking place during the 2018 holiday season, as Hurricanes Florence and Michael did not cause as much property damage as the 2017 storms.
Financial market turbulence may dampen holiday spirit
Recent flare-ups in financial market volatility could be a tangible restraint on holiday retail sales. The S&P 500 has essentially erased the entirety of its 2018 gains in the past six weeks. The recent pullback may cause shoppers to think twice before making large purchases or upgrading from generic to luxury brands this season.
32 days of Christmas
The 2018 calendar sets up nicely for retailers, as there are 32 shopping days (including five full weekends) between Thanksgiving and Christmas – the maximum possible. As a result, some consumers will have an extra paycheck to work with ahead of the holidays. However, shoppers are being more easily enticed to make purchases as early as October thanks to fierce price competition among retailers. This pulls sales forward into October and away from the traditional holiday retail season of November and December.
About the AuthorPatrick Burnson, Executive Editor Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]
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