Economic Forecasts

Retail Sales Post Strong Recovery Ahead of Holiday Season

Kiplinger’s latest forecast on retail sales and consumer spending.

Retail and food service sales jumped 1.9% in September. The laggards of the recovery, clothing and department stores and restaurants, are finally bouncing back, though they have not yet recovered fully to their prepandemic levels. Motor vehicle sales were strong, while e-commerce, building materials, and sporting goods/hobby stores remained the best-performing categories relative to precrisis levels.

Sales are now near or above February levels for most store categories. After consumers socked away more savings in recent months, they have had cash to spend on big-ticket items such as cars and home improvement projects. They are spending more on goods right now than on services, so almost all retail sales categories are benefiting.

Holiday sales are shaping up to be strong this year. E-commerce is leading the way with an expected 29% rise over last year. Even in-store sales will do well, up 5% over last year’s holiday season. However, gains are likely to be uneven. Many smaller regional malls have lost anchor tenants such as Sears and JCPenney, and so should see traffic diminish.

The recent surge of COVID-19 infections in 33 states could slow the recovery progress of restaurants, clothing and department stores. Things were just getting better for this group. Restaurants have been figuring out how to operate with health precautions, but likely will remain limited in their capacity for some time to come. Also, the arrival of colder weather will start to limit outdoor dining.

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