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Predicting Holiday Spending

While consumers may look forward to lower prices on Thanksgiving turkeys this year, signs are also good for retailers more concerned with the day after Thanksgiving.

One method for predicting the outlook for holiday spending is comparing the back-to-school spending during the same year. For instance, the back-to-school spending in August 2012 increased 2.9 percent, while early holiday spending—defined here as sales in November of the same year—also rose 2.9 percent. The retail spending figures exclude food and auto sales.

The relationship between back-to-school and holiday sales is not perfect, and sometimes back-to-school sales are a bit higher than holiday sales (as happened in 2013, 2014, and 2015) or a bit lower (as in 2016). But back-to-school spending generally is a reliable gauge of early holiday spending, as seen in the chart below.

This year’s August back-to-school sales rose 4.3 percent over 2016 sales, suggesting strong growth in early holiday sales this November. And that’s great news for retailers.

Year Over Year % Change in Retail Sales, August and November
Source: Census, Chmura Economics

 

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