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U.S. retailers should expect cheerful holiday sales season

Staff Writer |
The 2018 holiday season will still be a “cheerful” one, IHS Markit said in its outlook.

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Retail sales during the winter holidays will grow 4.4% over last year, which saw a 5.7% increase — the best results since 2005, said IHS Markit associate director James Bohnaker in a report published on Wednesday.

Online shopping will be one of the biggest this year, accounting for 18.9% of all holiday retail sales, up from 17.8% reported last year, Bohnaker pointed out.

Solid gains in the U.S. employment sector are the primary driver behind this positive outlook, according to IHS Markit.

“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,” Bohnaker said.

But this year’s solid results will not beat the 2017 surge, which was triggered by the anticipation surrounding tax cuts, he added.

“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,” Bohnaker wrote.

So far this year, retail sales were “soft” in key holiday categories and there was less rebuilding from hurricane damage, the IHS outlook noted.

“Hurricanes Florence and Michael did not cause as much property damage as the 2017 storms,” Bohnaker said. “It [is] unlikely that holiday sales growth will suddenly accelerate in year-over-year terms.”

The biggest risk to IHS’ retail sales outlook is another major sell-off in the U.S. equity space, warned the associate director.

“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,” he said.

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