3 Learnings as Holiday Retail Forecast Looks More Upbeat

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As summer ended, much of the early forecasting for the holiday season was filled with dread: the trade war with China had the potential to inflate prices on electronics like popular gaming consoles, labor strikes could create income uncertainty, and recession fears had everyone feeling nervous about what the holidays would look like this year.

Here are a few takeaways from Morning Consult’s most recent holiday shopping trends forecast, which is based on consumer confidence data from a late October survey of 2,200 adults:

1. We likely dodged the most dire scenario

As it turns out, those ominous warnings about burdensome tariffs and economic downturns were overblown (in the near-term, at least) so consumers, and retailers, are back on the sunny side. The October jobs report showed a strong labor market, corporate earnings were higher than expected and for the most part, the tangible effects of the trade war didn’t reach consumers in a meaningful way. And when an apparent breakthrough in trade negotiations was reported, consumer confidence swelled.

“The reason we felt comfortable releasing this report was that we saw all these … fundamental improvements,” said Morning Consult analyst John Leer. “Not only does the fundamental picture look better, consumers acknowledge they are better off than they thought they were in August. That sort of confidence allows them to go out and buy a TV in November instead of waiting until next June.”

Uncertainty stemming from the United Auto Workers strike has also been largely assuaged after the union’s deal with General Motors.

“Consumers acknowledge they are better off than they thought they were in August. … That sort of confidence allows them to go out and buy a TV in November instead of waiting until next June.”
John Leer, analyst, Morning Consult

2. This year’s shopping numbers come with caveats

Because Thanksgiving comes so late in the month this year, the shopping season is truncated, which could still affect sales as shoppers try to cut corners to fit everything in before Christmas.

Predictions this year are based on percentage growth from last year’s sales. Due to a December that featured both a government shutdown and a stock market nosedive, 2018 did not end with strong holiday sales. When marveling at how much better the forecast is looking now versus the end of the summer, it’s important to keep that in mind–the bar was set very low.

3. Uncertainty remains, even amid positive signs

The gist of Morning Consult’s report is that the forecast for this year’s holiday season doesn’t look as bad as it did in late summer. Those predictions laid out a wide target range for where holiday retail sales growth will be this year, and this latest report doesn’t narrow down that range at all, a fact that “speaks to uncertainty,” said Leer.

So far, these new, more upbeat predictions are holding: Walmart released its Q3 sales this week with better-than-expected numbers, and October retail sales were also higher than anticipated.

There’s no way to know for certain that things will stay rosy through the end of 2019—at least the darker clouds seem to have lifted.

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