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Holiday Shopping 2015

Like the stores that put out Christmas decorations before Halloween, it’s become a Barataria tradition to put up holiday sales projections in mid-October. Don’t blame us, that’s when they come out as retailers gear up for the mid-November rush.

Last year just over $600B in sales went out the doors at retail establishments, about 19% of their total for the year. $90B of that was online. 2014 was a big turning point, marking the biggest selling season since 2009. Will 2015 come in even bigger?

Retailers are counting on it, and that’s the prediction. A big holiday shopping season to launch us into a happier 2016.

The look of desperation is totally unnecessary.  Really.

The look of desperation is totally unnecessary. Really.

There are many reasons why holiday shopping season is important beyond its large share of retail sales. This is the one time of year when the media gets a consistent and solid read on the mood of consumers. They have been one of the lagging indicators for a turnaround, not showing much life until earlier this year. A big improvement in consumer attitudes is what remains for something that will be called a “recovery”.

Consumers have been slow because job growth has been slow, so it’s one big vicious cycle.

The National Retail Federation (NRF) is calling for a 3.7% increase over last year, down a little bit in growth from 2014’s 4.1%. That would be a total of $630B in sales, $105B of it online. Since they were perfectly accurate for the last two years their estimate has to be taken seriously.

Holiday sales history, from the NRF.

Holiday sales history, from the NRF.

Deloitte is calling for a 4% increase, but there’s a problem with comparing estimates. It appears that everyone has a different way of defining “holiday shopping”, with Deloitte clearly looking at all retail November to January in their $960B estimate. Given that the estimates are a least close with different methodologies we have to say we have something like a consensus.

Now, that's a retail forecast!

Now, that’s a retail forecast!

Christmas 2015 will be a good one.

There are a few notes of caution, however. In the past, deep discounting by retailers has been a seriously limiting factor, driving up the frenzy but limiting the potential for serious upside. That is likely to be repeated this year with Walmart profits way down and investors more than a little nervous about their prospects. They have a terrible incentive to dive up the top line, sales, even at the expense of the bottom line, profits.

The NRF’s Chief Economist Jack Kleinhenz has his own notes of caution, too. The solid growth could have been better had 2015 not been so mixed:

“While confidence data is encouraging, slower job growth in 2015, deflationary retail prices and the mix of consumer spending somewhat shifting toward big ticket items and services, as well as the wild card in our government spending debates, will all contribute to the slower growth rate of sales expected for the holiday season.”

Happy shoppers make for a happy Christmas.

Happy shoppers make for a happy Christmas.

This should be taken as reason to believe that the most likely reason the estimates would be off is that they are too low. It would take a bit more good news on the job front to boost confidence and the lack of a government shutdown will also be good.

As far as jobs go, last year 714k jobs were created just for the holiday rush, and this year there may be as many as 35k more. Retailers found themselves short-handed many times last year as they were just a bit conservative in the face of high estimates of growth.

We have to remember that this is already accounted for in the “seasonal adjustment”, so don’t be too excited. Still, a bump of 5% in jobs over last year is not bad, and it may be the thing that gets us out of the cycle we’ve been in.

All together, the prediction is for a holiday season that will be pretty good even though it could have been better. Hopefully that will be what helps us get through the entire winter without a downturn like we have seen two Januaries in a row.

15 thoughts on “Holiday Shopping 2015

  1. The best holiday season would be the one in which the most people decided to dial down the materialism and NOT SHOP. Is there any one of us not already burdened with too much crap? Grrrrrr……

    • You know I’m with you on a personal level – we do have too much crap. But this really is a critical economic indicator and we can’t just dump it overnight without a lot of pain.
      I have been wondering if people’s habits are changing – buying less, buying more artisan works, etc. The reason we had several weak Christmases may have at least something to do with a gradual change away from a buying frenzy. But I have zero data on that despite looking every year. What I can say is that sales at big stores are lagging the overall growth.
      Meanwhile, let’s all buy a really nice piece of art from some craftsman for the people we love and enjoy some time loafing by the fire. 🙂

      • What is (supposedly) good for the economy is very often not good for individuals. A conflict of interest between individual benefit and public (?) benefit. There isn’t any simple resolution of it. But the exploitation of individuals needs to be at least acknowledged and thought about…..

      • Allright then, here’s something to think about at a time when the velocity or turnover of money is at an historic low:
        Let’s say you mow your lawn. Great, you have a nice looking lawn. But why didn’t you pay someone to do it? Then they would have money they could use to eat out and the cycle continues through the economy, providing work for everyone.
        Now, let’s say that you are spending money on something with a lot lower labor component like a TV or something. But there is still someone with a job because of it, right? Why is it better for you to save that money rather than provide that worker with a job?
        And even if that job is far away aren’t we all one big global economy at some point?

  2. Responding to Eric above:
    This is all just pontificating, not seriously telling other people what to do with their money. But I believe the stats show that most US households have much debt and little savings or investment. Very often a negative net worth. Hard to argue that this is good. Why is it? When I was a kid Household Finance had a radio add jingle “Never borrow needlessly … but when you must ….” Now, banks encourage people to liquidate the equity in their homes to take vacations, and otherwise to spend irresponsibly. They are constantly bombarded with sophisticated “spend, spend, spend” messages. They are manipulated to spend, across the ever-increasing bandwith of messaging. Yeah, that spending benefits the vendors and producers of what they are buying, but at what social cost? Many of us are paying lip service, or more, to the advantages of buying locally sourced goods and services, and I hope that continues…

    • Right on! But to be fair consumer credit was really tightened in 2010 or so and hasn’t loosened up much. That’s probably for the best if it stays that way – but it has been hurting us. Again, this is all about transforming the economy into something new, something where we have the strong base to be able to handle globalism without it killing us. And that does mean more local sourcing.
      I have been thinking about this a lot but in all honesty the data showing what direction we’re going just isn’t there to give me anything conclusive. I’d love to find one or two things that we should keep an eye on but I just can’t. It’s all talk, all the way through as far as I can tell. Maybe we are moving the right direction but it’s very hard to say.
      Overall, though, I totally agree with you. For example, Egypt imports 60% of its food. That means that when their currency fluctuates because of something stupid by banks the people starve. Their whole nation is unstable largely for this reason. I’m all for free global markets but not covering the basics at a local level is a recipe for disaster. The key to me is Resiliency or the ability to weather a likely storm. I use Egypt as an example because it’s pretty extreme, IMHO, but we have similar issues with energy, relying way too heavily on imports and unsustainable sources. I favor renewables not because I love polar bears or anything – it’s simply the right thing to do for the economy.

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