Small Business Not Optimistic About Spending

The perennial hopes of a strong retail shopping season are once again upon us. As always, the National Retail Federation (NRF) is kicking of the season with their always cheerful holiday forecast. To wit:

“The National Retail Federation announced today it expects sales in November and December (excluding autos, gas and restaurant sales) to increase a solid 3.7 percent to $630.5 billion — significantly higher than the 10-year average of 2.5 percent. Holiday sales in 2015 are expected to represent approximately 19 percent of the retail industry’s annual sales of $3.2 trillion. Additionally, NRF is forecasting online sales to increase between 6 and 8 percent to as much as $105 billion.”



To no great surprise, since the NRF is an industry trade group, their forecasts are generally much more optimistic than reality eventually turns out to be. 

For a more “realistic” expectation of retail sales over the next couple of months, we might want to look at data from actual retail businesses. The National Federation of Independent Business Small Business Survey shows a substantially different outlook from retailers.



As shown, the percent of businesses surveyed expecting higher sales over the next three months is declined sharply from the beginning of the year. Not surprisingly, when forward expectations decline so do actual nominal sales.

Furthermore, if we look at “control purchases,” which also excludes gas, food and autos, we see that actual activity in the economy is at levels more normally associated with recessionary environments. 



Given the current deflationary backdrop, the sharp decline in imports and weak wage growth, it is quite likely that actual retail sales will likely disappoint the NRF’s forecast of a “shopping season significantly above the 10-year average.” 

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