It’s not even Halloween yet some stores are already breaking out their Christmas-season inventory. It’s a sign, experts say, that some leaders feel consumers are still ready to shop even as some economic indicators paint a decidedly less rosy mood.
Indeed, new manufacturing reports this week that retailer experts follow are not expected to be strong. But reflecting sentiment around the industry, the National Association of Retailers is projecting holiday sales to increase between 3.8%-4.2% this year to around $730 billion, a sizable increase from the 2.1% growth last year.
Torrey Foster, vice chairman and managing partner of Korn Ferry’s Consumer practice, says consumers are in a better position this year than they were last year. “It would take something significant to unhinge consumers from where they are today,”he says. He cites such factors as employment being at a 50-year high and the continuation of wage growth, which means consumers have more disposable income. In addition, unlike the two recessions in the 21st Century, “there are no bubbles waiting to burst,” Foster says.
To be sure, the latest number still are making some experts pause. Economists expect September durable goods production—manufactured products meant to last three years or more—to decline 1% when figures are released this week, a reversal from increases over the last three months. Even retail sales declined month-over-month in September for the first time since February.
“All said, no one knows for sure what this holiday buying season will be like,” says Craig Rowley, a Korn Ferry senior client partner also with expertise in the consumer sector. “But I think it be better than the naysayers are predicting because the economy is strong and people have bucks in their pockets.”
For his part, Foster says the fact that Thanksgiving falls on the latest date possible this year could have a bigger impact on holiday sales than any slowdown or recession potential. Thanksgiving falls on November 28, meaning that consumers only have 26 shopping days from the unofficial start of the holiday season on Black Friday to Christmas.
For a year now, retail leaders have been facing a juxtaposition between global issues like trade tensions and political turmoil—which makes some camps nervous--and strong consumer data that raises confidence levels. One way retailers can strike a balance between the two opposing forces is by planning leaner inventories, having enough product readily available to meet demand but not too much that they are left with an oversupply in the event consumers pull back on spending at the last minute.
Foster and other experts don’t expect that to happen, however. One month of slowing retail sales and declining consumer sentiment doesn’t make a trend, even if several months of declining manufacturing production does. And while he says there may be cause for concern if October consumer sentiment figures, which are scheduled for release this week as well, show another decline, “it will take a lot to knock consumers off their current trajectory because there are still a lot of other indicators that are incredibly bullish.”