Opinion: Holiday spending forecast looks bright

Have you put together your shopping list yet?

Yes, the holiday season is here – and holiday shopping means big business for the economy.

This year, retailers expect much more than the proverbial lump of coal. The U.S. economy has been gaining momentum, and low energy prices should have consumers in a good mood.

Major retailers and shipping companies are expecting holiday sales to increase more than 4 percent – a number we haven’t seen since 2011. For reference, holiday sales throughout the last decade have averaged 2.9 percent growth.

Many retailers have put significant emphasis on hiring to meet the demand, bringing us to believe that seasonal workers may be increased even 10 percent more than last year. Two primary shipping companies have doubled their holiday workforces largely due to the demand expected from e-commerce.

Most of the economic data in the United States supports a rather jolly shopping season; however, we can’t turn a blind eye to some risks that could shake consumer confidence.

A correction in the stock market or signs of a recession in Europe are events that would negatively affect this forecast.

At this time, industry experts think the probability of a “spoiler event” occurring is relatively low. While we have seen deteriorating data from Europe, it has not materially impacted growth in the U.S. The nation also witnessed a stock market correction in October, yet didn’t see it shake consumer confidence. It appears that the year will finish with some positive economic momentum.

Financial health of consumers
Compared to 2013, consumers are in better financial health for a number of reasons. First, household net worth is at an all-time high due to higher stock and home prices. Second, the labor market is solid.

Unemployment is under 6 percent and job growth has been increasing at a nice pace. Experts anticipate these employment gains to continue as there are 4.8 million job openings, a level we haven’t seen since 2001.

The price of oil also has become an important player in consumers’ financial health toward the end of the year. Crude oil started the year at $93 per barrel, declining 14 percent by the end of October, to just $80 a barrel.

In response, the national average price at the pump declined almost 10 percent, translating to more disposable income in consumers’ pockets. Experts estimate this will return nearly $1 trillion back to the economy for holiday shopping.

Overall, consumer confidence has been trending up since the Great Recession – and when we feel good about things, we consume.

Shopping days
Keep in mind, some events that occurred last year are unlikely to repeat in 2014, leading us to believe stronger sales are ahead.

For example, fourth-quarter 2013 was particularly volatile with a government shutdown that shook consumer confidence, inevitably affecting spending. Couple the government shutdown with the unseasonably cold and stormy weather that caused store closings across the nation, and it’s clear to see the unusually unfavorable situation retailers were faced with last year.  

Additionally, in 2013 there were six fewer shopping days between Thanksgiving and Christmas compared to 2012.

This year there is one additional day compared to 2013, which makes year over year comparable sales easier to beat.

I think this holiday shopping season will support our forecast of 3 percent economic growth in the fourth quarter. Experts also expect to see positive returns in the domestic stock markets. In late September, we saw the start of a brief 8.5 percent correction, which lasted only 19 days before heading back to new highs.

KC Mathews is a chartered financial analyst and executive vice president and chief investment officer of UMB Bank in Kansas City. The bank operates two Springfield branches.