Thursday, October 4, 2012

US holiday spending expected to increase at a slower rate

The National Retail Federation (NRF) released its annual forecast for the 2012 holiday season and it’s not quite as promising as many had hoped. The good news is that the association expects US retail sales to increase 4.1% across all channels to $586.1bn. The bad news is that this is much slower growth compared to 2011 at 5.6% and 2010 at 5.5%.

According to the NRF, consumers are expected to hold back on spending due to mixed economic data and the uncertainty over whether lawmakers will be able to avoid implementing the “fiscal cliff” of across the board spending cuts that are scheduled to go into effect January 2 as well as tax increases for all income groups.

One bright spot in the retail sector continues to be ecommerce. Of the $586.1bn expected in total retail sales, $96bn is expected to be generated via ecommerce. In fact, NRF’s estimates ecommerce will grow 12% for the 2012 holiday season. This will particularly benefit not only UPS and FedEx but also the USPS and regional small parcel providers.

The slower overall forecasted retail growth is in line with the Stifel Nicolaus/Transport Intelligence Logistics Confidence Index. During September, survey respondents were asked about peak season. About 43% of respondents expect an increase in volumes for the peak season while an equal percentage indicated an increase will not take place.

Expectations from transportation providers remain muted despite the current industry optimism of the September/October release of the Apple iPhone and other high tech gadgets. It appears this potential “bump” in air cargo will be short-lived if the forecasts and expectations of the holiday season hold true.

Still, US ocean imports remain strong particularly for the US East Coast ports with Ports of Charleston, Savannah and Virginia all reporting double digit import tonnage. Perhaps this will bode well over the coming months for not only rail and intermodal but also for the truck providers.

However, the fact remains that “uncertainty” continues to hold the US economy hostage. As a result, consumer spending remains weak, unemployment remains high and the national debt continues to grow. The need for decisive action is greatly needed and is overdue - a clear plan of action to erase the uncertainty needs to be implemented or else the US economy will face a similar situation as that of Europe.