After retail sales wrapped up 2018 strongly, U.S. consumers face headwinds to maintaining last year’s robust level of spending.
The Commerce Department, normally scheduled to publish retail-sales data Wednesday morning, won’t release the figures due to the government shutdown. Still, some private-sector analysts who track the retail sector estimate that Americans stepped up their spending in November and December, crucial months that include Thanksgiving Day, Black Friday and Christmas, but voice caution about 2019.
Some retailers are preparing for consumer spending to weaken, even if there is no sign it will happen soon, said Rod Sides, vice chairman of retail at Deloitte. The firm’s clients are looking to cut costs, he said. “Retailers are going to have to spend 2019 figuring out what they do when the tide goes out.”
IHS Markit forecasts 5.0% holiday retail sales growth in the November-December period compared with the same time in 2017. This figure, which excludes autos, gas and food services, would be tied with 2014 for the second best growth period since 2005.
The firm projects that retail sales at auto dealers were relatively strong during the holidays, despite a slower 2018.
Separately, Mastercard SpendingPulse, which tracks both online and in-store spending with all forms of payment, estimates total U.S. retail sales, excluding automobiles, climbed 5.1% between Nov. 1 and Dec. 24 from a year earlier, the biggest increase in 6 years.
Factors including labor-market gains, rising wages and elevated consumer confidence helped support spending this holiday season. Lower gas prices, too, have put more money in Americans’ wallets.
Megan Draper, 37, landed work in November as a production clerk at a Goodwill in Pikeville, Ky., after a five-year spell of unemployment. Thanks to her new job, Ms. Draper had money to buy her sons Christmas gifts including a bike, a guitar, an amplifier and gift cards.
“I was able to get everything that my kids asked for and stuff for my parents [and] my siblings,” Ms. Draper said. “It’s the first time I’ve been able to do it in a long time.”
Jack Kleinhenz, chief economist at the National Retail Federation, said the U.S. consumer is in a positive position, backed by a solid job market and rising wages. There will be headwinds this year, though, he said.
“Overall the economy is in a good place and the consumer is at this point in a good place, but I do anticipate the general direction of the economy to be slower, but not negative,” Mr. Kleinhenz said.
Economists on the Economic Advisory Committee of the American Bankers Association forecast such a slowdown. The median spending forecast of these 15 economists from major North American banks was for 2.2% growth in consumer spending in the fourth quarter of 2019 compared with the same period a year earlier. That is down from estimated 2.9% growth in 2018.
Rising interest rates could bite into discretionary spending, and a stock-market decline, under way since last fall, could translate into lower spending, the so-called wealth effect. Other factors that could chill spending include a fading stimulus from the tax cut enacted in late 2017 and trade frictions that could worsen.
Further, the government shutdown, especially if it continues, poses a risk to spending. Hundreds of thousands of federal workers missed out on their first payday of the closure late last week.
“Consumer sentiment is at quite a high level,” Janet Yellen, former Fed Chairman, said at a retail conference Monday, but “it has dropped somewhat based on expectations for the future and I think a general sense that the government is not functioning,” amid the shutdown. She also pointed to volatile markets, trade disputes and less synchronized global growth as risks.
A housing-market slowdown and uncertain political climate have damped the spending outlook for Jessyka Boatright, 33. The Southern-California real-estate agent said her commission-based earnings took a large hit in 2018 due to sluggish home sales in the area. Ms. Boatright has pulled back on spending as a result: She and her husband, who normally spend about $500 each on presents every Christmas, opted to not even buy gifts this season. Instead, she is focused on paying off debt.
“My husband and I both [have] tried to minimize so much,” Ms. Boatright said. “We can reduce a lot of our bills, but it just feels like something else creeps up. Either the electricity rates go up or food gets more expensive.”
Several retailers recently said that December sales dragged. Macy’s Inc. reported total comparable sales rose 1.1% during November and December and the chain lowered its sales and profit forecasts for the fiscal full year, which ends in February. Rival Kohl’s Corp. and mall stalwart L Brands Inc., the owner of Victoria’s Secret, also posted tepid holiday sales. However, other retailers that have fared well in recent quarters reported strong holiday sales last week, including Target Corp. and Costco Wholesale Corp.
Macy’s pointed to the unusually long period between Thanksgiving and Christmas this year. “The holiday season began strong—particularly during Black Friday and the following Cyber Week, but weakened in the mid-December period and did not return to expected patterns until the week of Christmas,” said Jeff Gennette, chief executive officer of Macy’s.
An unusually early Thanksgiving and holiday deals being offered as early as October from some retailers, may have siphoned off December sales, said Jill Standish, head of Accenture’s Retail practice.
“November was amazing. December was a little bit of a disaster,” for some retailers, said Ms. Standish.
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