Retailers expect consumers to deliver another strong holiday shopping season, even as the trade war hangs over the economy.
America’s factories are getting crushed by America’s trade war with China. Signs of fraying consumer confidence are starting to emerge. And the service sector is slowing down.
Even so, retail sales in November and December will nevertheless grow between 3.8% and 4.2%, to up to $730 billion, the National Retail Federation predicted Thursday. The trade group’s forecast excludes car, gasoline and restaurant sales. Holiday sales have increased by an average of 3.7% over the past five years, according to the group.
“The US economy is continuing to grow and consumer spending is still the primary engine behind that growth,” National Retail Federation CEO Matthew Shay said in a release.
The group expects retailers to hire between 530,000 and 590,000 holiday workers to help with demand. Last year, retailers hired 554,000 temporary workers, the group said.
Job growth, a low unemployment rate and rising wages will bolster holiday spending, Shay said. “Consumers are in good financial shape.”
Discount stores such as Walmart, (WMT) Target (TGT), Costco (COST) and TJX (TJX) have grown in recent years, taking advantage of bankruptcies across the sector and mall closures. Those chains’ success has often come at the expense of department stores such as JCPenney (JCP) and Nordstrom (JWN) and mall stalwarts like Gap (GPS) and Bed Bath & Beyond (BBBY).
The Trump administration has tried to keep consumer goods coming from China off the list of products subject to tariffs, and this forecast suggests the administration has succeeded in shielding consumers from the brunt of the trade war.
But the administration’s latest actions on trade will soon start hitting popular holiday items, such as laptops, TVs, smartphones, toys and clothing. The administration is phasing those tariffs in over the course of a few months. Some went into effect in September, but others were delayed until December 15 to avoid driving up prices on holiday gifts.
The trade war between China and the United States, the world’s two largest economies, is weighing on retailers.
“There has clearly been a slowdown brought on by considerable uncertainty around issues including trade, interest rates, global risk factors and political rhetoric,” said Shay.
The trade war has damaged other sectors of the economy more than retail. By slowing down global trade and raising the cost of some goods, it has sapped demand for manufactured products.
The slowdown in manufacturing — often an early indicator of problems in the wider economy — showed up starkly in a dreadful report released Tuesday. Factory activity contracted in September for the second straight month; by some measures it was the worst month in a decade.
The impact of tariffs on holiday spending “remains to be seen,” said Shay.
Retailers are taking different approaches to limit the impact of tariffs on consumers. Small businesses have already been forced to raise prices, the National Retail Federation said. The group found that 79% of consumers they surveyed in September were concerned that tariffs will cause prices to rise, possibly impacting their holiday spending.
— CNN Business’ Matt Egan and Katie Lobosco contributed to this article.
