Predicting growth in Q4 retail spending that matches last year, which was the highest since 1999, consultants Retail Forward Inc. also predicts strong online sales growth. Total retail spending in the fourth quarter will grow 6.5%, equal to last year and the most robust growth since 8.5% in 1999, Retail Forward projects. By comparison, online spending will grow 26% to $22 billion from $17.5 billion in last year’s Q4.
"The outlook for the holiday season should not be deterred by recent weak job growth and high fuel prices, which have raised doubts about the sustainability of the economic rebound," comments Frank Badillo, senior economist for Retail Forward. "Lean inventories and firm prices should help. Retail sales should also continue to be boosted by a healthy housing market," he adds.
"E-commerce sales will continue to represent a growing share, driven by increasing comfort shopping online and improving site functionality," says Retail Forward economist Steven Spiwak. Any job market turnaround will generate stronger holiday spending, which will benefit e-commerce sales, he says. It should also generate greater demand for broadband Internet access, which in turn will encourage more consumers to shop online, he says.
On the downside, Retail Forward says continuing high fuel prices represent the biggest threat to the outlook. “However, retail sales should continue to hold up as consumers tend to treat high fuel prices as temporary and avoid big cutbacks in other spending,” Retail Forward’s report says. “On the other hand, the positive outlook for mortgage rates should ease consumers' concerns about their near-term spending plans.”
Among the key retail sectors, Retail Forward makes the following projections:
• After four straight years of holiday sales declines, conventional and national department stores should realize a small gain this year.
• Supported by firmer prices, sales at apparel and shoe stores this holiday season should turn in a solid improvement over last year.
• Sales at supercenters, warehouse clubs and dollar stores should continue to surpass most other retail channels this holiday season.
• Holiday sales growth in the consumer electronics and appliance store channel should be strong this year, but below last year's level.
• Home improvement stores are expected to sustain an elevated sales pace bolstered by the continued strength of the housing market.
Q4 growth since 1992:
2004 (projection): 6.5%
2003: 6.5%
2002: 2.9%
2001: 2.7%
2000: 4%
1999: 8.5%
1998: 6.8%
1997: 5.1%
1996: 5.1%
1995: 4%
1994: 8.8%
1993: 8%
1992: 10.5%
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