By Alan Wolf, YSN
Despite a drop in consumer confidence due to the recent rise in COVID-19 infections, shoppers continue to spend as we head into the all-important holiday selling season.
“If consumer finances are any indication, there’s reason to be optimistic,” said Jack Kleinhenz, chief economist of the National Retail Federation (NRF).
Writing in the trade association’s Monthly Economic Review for October, Kleinhenz pointed to the sharp increase in August retail sales, which rose 12 percent year over year and brought the year-to-date gain to 15 percent. Also auguring well for Christmastime sales is the record spend NRF is projecting for Halloween, the precursor to Black Friday, which is expected to top $10 billion in holiday-related items.
Despite a recent series of economic hurdles, including slowing growth, rising inflation, and falling consumer confidence, NRF is sticking to its high-end forecast of 13.5 percent sales growth for the full year, to $4.7 trillion.
“Households remain in good shape, with consumers in the aggregate actually underspending relative to current income,” Kleinhenz countered. And even though enhanced unemployment benefits have expired, he said the loss is “easily offset by the savings stockpiled since the coronavirus pandemic began.”
Incomes will also get a boost from Child Tax Credits and expected strong employment gains, he said, pointing to accelerating wage growth and record number of job openings this past summer.
“That is a clear indication that demand for labor is still strong and that a lack of available workers – not a lack of jobs – remains the major hurdle to robust hiring,” Kleinhenz said.
He added that the strong momentum seen in August’s retail sales tallies indicates “a big disconnect” between consumer confidence and consumer spending.
“There’s a saying that you should never underestimate the American consumer,” Kleinhenz concluded, “and its corollary is that you should watch what consumers do, not what they say.”