By Harriet Torry
The coronavirus pandemic is creating novel hurdles for Americans' spending this holiday season, posing potential challenges for an economy that leans heavily on their willingness to consume.
Households face the prospect of Halloween without trick or treaters, Thanksgiving without family travels, Black Friday without crowds, and a December without parties and in-person gift-giving. Congressional deadlock over fresh fiscal aid for the millions unemployed and a contentious presidential election campaign are also potential dampers on this year's cheer.
Holiday sales -- usually spanning November and December -- represent roughly 20% of annual U.S. retail sales each year, according to the National Retail Federation. And retail spending accounts for about 25% of consumer spending in a typical year.
A number of economists are predicting little growth or none whatsoever this year compared with 2019. RSM US chief economist Joe Brusuelas expects retail sales to increase just 0.5% this holiday season -- partly because Congress hasn't passed a new stimulus package.
Sucharita Kodali, a retail-industry analyst at Forrester Research Inc., expects retail spending this holiday season to be flat compared with 2019. Though she predicts online sales will grow 20% to 25%, the sharp decrease in foot traffic at bricks-and-mortar stores is expected to keep overall spending in check this November and December. Given coronavirus constraints, "there's not going to be as much Halloween spending this year," either, she said.
This year's outlook is so unpredictable that some forecasters aren't even making predictions. The National Retail Federation has delayed the release of its holiday forecast for the first time in decades, citing a lack of clear economic indicators and other variables, including the presidential election and a possible resurgence of Covid-19, the illness caused by the new coronavirus.
The NRF said holiday sales -- which exclude purchases at automobile dealers, gasoline stations and restaurants -- rose 4.1% in 2019 over the previous year, after increasing 2.1% in 2018.
Still, some economists see reasons for optimism. Households, particularly the middle-income and affluent, have paid down debt and boosted their savings, giving them a financial cushion. Deposits at commercial banks jumped to a seasonally adjusted $15.72 trillion in September from $13.39 trillion in February, according to the Federal Reserve.
"That's money that people were earning and not spending on dining and travel," said Calvin Schnure, senior economist at Nareit, a trade group that represents real-estate investment trusts. "We've never seen this kind of increase in a recession -- usually household finances weaken; this is really different and shows there's a lot of spending power in the economy," he said.
Mr. Schnure expects 5% year-over-year growth in retail sales this holiday season based on the fact that consumers are saving by "having dinner at home instead of going to restaurants and watching Netflix instead of going to the movies once a week."
James Bohnaker, an economist at forecasting firm IHS Markit, is also predicting 5% year-over-year growth in holiday retail sales, and he is expecting some kind of further fiscal stimulus to come before the end of the year that will help prompt holiday gift-giving. Mr. Bohnaker noted that the holiday spending season, which usually runs from Thanksgiving through the end of the year, is "creeping earlier; it seems things are kind of in full swing already."
Retailers are pushing an earlier start to the holiday season, both to limit crowds at stores and to ease pressure on supply chains by avoiding preholiday-order bottlenecks.
Spending on goods has been a bright spot for the economy recently, as consumers prepared for further months of working and studying from home by spending on vehicles, home improvement and sporting goods. Retail sales, a measure of purchases at stores, restaurants and online, rose a seasonally adjusted 1.9% in September from the previous month, the Commerce Department said Friday.
Christmas Decor, a decorating franchise in Irving, Texas, expects a strong holiday season, as people working from home are saving money and want to brighten their houses, said Brandon Stephens, president. "A lot of people are focusing on the home, family, looking for something that makes them feel hopeful," he said.
In the long term, economists say, consumers can only keep spending if they are earning. This means the postholiday outlook will depend on job growth, which slowed sharply in recent months as more layoffs turned permanent.
This year's muted retail expectations are being reflected in weak holiday hiring. Seasonal job postings this year are 11% below last year, job site Indeed said this month.
The pandemic also is changing the nature of seasonal holiday work. The share of job openings related to filling online orders is up threefold compared with previous years due to the increase in internet shopping.
Mathieu Stevenson, chief executive officer of Snagajob, an online platform for hourly work, said bricks-and-mortar stores are creating new roles, like sanitization associates who wipe down shopping carts between uses, temperature takers and capacity monitors who limit the number of shoppers allowed in and make sure they keep distanced from each other.
Economists say it will take a lasting solution to the pandemic and many more new jobs to keep the holiday cheer going after the decorations come down.
Write to Harriet Torry at email@example.com
(END) Dow Jones Newswires
October 18, 2020 10:14 ET (14:14 GMT)Copyright (c) 2020 Dow Jones & Company, Inc.