Holiday Sales Expected to Hit Record Levels in 2019

The holiday shopping season runs for about two months.

Every year, it seems, the holiday shopping season starts a little bit earlier. The retail sprint that used to begin on the Friday after Thanksgiving now kicks off at many stores on Nov. 1.

It also keeps growing steadily bigger. This year's holiday sales total is expected to grow by between 3.8 and 4.2% from the 2018 result, according to a forecast from the National Retail Federation (NRF). That's between $727.9 billion and $730.7 billion, excluding the revenues of automobile dealers, gasoline stations, and restaurants. It's also a slightly faster growth rate for the season's sales than the 3.7% averaged over the last five years.

"The U.S. economy is continuing to grow and consumer spending is still the primary engine behind that growth," NRF President and CEO Matthew Shay said in a press release. "Nonetheless, there has clearly been a slowdown brought on by considerable uncertainty around issues including trade, interest rates, global risk factors, and political rhetoric. Consumers are in good financial shape and retailers expect a strong holiday season. However, confidence could be eroded by continued deterioration of these and other variables."

Prices may be higher

Last year, retailers were able to hedge against the impact of tariffs on imports by buying inventory earlier than usual. But with hundreds of billions of dollars worth of additional goods now subject to those tariffs, that's no longer an option. And further trade war action from Washington could push retail prices higher in the coming months, though given the administration's inconsistency on trade policy with China and other countries, how that might play out is impossible to predict.

Rising prices might not put too much of a damper on things, though, given that consumers are feeling relatively good about the overall state of the economy.

"There are probably very few precedents for this uncertain macroeconomic environment," NRF Chief Economist Jack Kleinhenz said in the press release. "There are many moving parts and lots of distractions that make predictions difficult. There is significant economic unease, but current economic data and the recent momentum of the economy show that we can expect a much stronger holiday season than last year."

Kleinhenz added that higher wages and low unemployment have generally benefited families financially, suggesting that it will be a strong holiday season despite the looming cloud of the global trade war.

Holiday sales have increased every year since 2008 — the heart of the Great Recession — when they dropped by 4.7%. Sales in 2018 only rose by 2.1%, a relatively tepid gain compared to much of the past decade.

Spending strategy

Trade wars probably won't dictate how you set your holiday budget, but you shouldn't ignore the big picture when you're weighing your own circumstances. A downturn or recession could impact your household income. And while on the one hand, the possibility of more tariffs down the road may make it smarter to buy some things sooner rather than later — on the other, you'll still be shopping later, and if prices have gone up sharply, you may wish you had saved a bit more.

So, take a financial inventory now and figure out what you can reasonably afford to spend on your holiday splurges — and be willing to adapt if that figure comes out to "significantly less than I spent last year." It's not worth blowing your fiscal health for 2020 before the year even arrives.

Whatever discretionary income you have to spend, make a plan and do your best to stick to it. And don't forget to budget the travel or entertaining costs — not every holiday expense gets gift-wrapped.

The magic of the season may last a lifetime — the credit card debt we take on to create that magic should not.

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