NEW YORK (MainStreet) — An improving economy is pushing up holiday shopping sales forecasts.
Analysis from Deloitte shows sales are expected to reach $981-$986 billion, or a 4-4.5% rise from 2013. Last year, sales only rose 2.8% from the year before.
“Income, wage and job growth are positive indicators heading into the holiday season,” said Daniel Bachman, Deloitte’s senior U.S. economist. “Debt levels remain at historical lows, and stock market gains coupled with increasing home prices have a wealth effect on consumers, which may encourage increased spending compared with prior years.”
While the economy has much more room for improvement, these conditions make it easier for consumers to spend.
The unemployment rate currently stands at 6.1% and is showing signs of resilience. Average hourly wages, according to the Bureau of Labor Statistics, rose 2.1% over the past year as of August. On Monday, the Bureau of Economic Analysis said personal income rose 0.3% in August to $47.3 billion.
Prices for consumers have also eased in recent weeks. Gas prices have been falling steadily, as AAA said the average price for a gallon of gasoline stands at $3.33, compared to $3.43 last month. According to the Bureau of Labor Statistics, the consumer price index fell 0.2% in August and is up 1.7% over the past year. The Federal Reserve’s inflation target is 2%.
Considered the largest shopping period of the year, the holiday season is an important economic indicator, as consumer spending drives two-thirds of gross domestic product.
Deloitte expects online sales to grow 13.5-14%, shedding light on the shift from traditional brick-and-mortar outlets to digital ones.
Still, competition typically bodes well for consumers via lower prices.
Even though the consumer is healthier this year and can afford to spend more, don’t expect retailers to offer fewer promotions.
“These big retailers are going to be aggressive to fight against the Internet, so I would be very surprised to see cut backs in promotions just because the consumer is a bit stronger,” said retail expert Jan Rogers Kniffen, CEO of J. Rogers Kniffen WWE.
Along with more sales, the consumer has become savvier thanks to maintaining frugal habits adopted during the recession and more technology.
In fact, according to the report, “digital interactions will influence 50%, or $345 billion, of retail stores sales this holiday season.”
“Last year I said '40% off' is the new '30% off,' and that’s still the same this year,” Kniffen added. “And that’s not 40% off of a new higher price; it’s just 40% off of what used to be 30%.”
- Written by Scott Gamm for MainStreet. Gamm is author of MORE MONEY, PLEASE.