Elgin Area Chamber Of Commerce: Consumers Give 2022 Best Setup To Any Year On Record, But Economists Say Challenges Remain

Elgin IL

19 January, 2022

2:30 AM

Description

Press release from the Elgin Area Chamber of Commerce: January 18, 2022 Consumers gave 2022 the best setup to any year on record for retail spending, a dramatic turnaround for an industry that saw numerous closures and bankruptcies during the pandemic, but economists warn there are challenges for the year ahead. Holiday spending at the end of 2021 jumped 14.1%, a record that beat at least one forecast and overcame headwinds from supply-chain disruptions, the rise of the COVID-19 omicron variant and surging inflation, according to the National Retail Federation. The trade group's new report that retail sales for November and December increased from 2020 to hit $886.7 billion includes online and other nonstore sales, which were up 11.3% at $218.9 billion. The sector's performance outpaced the retail group's holiday forecast back in late October, which predicted just an 8.5% to 10.5% increase in sales to between $843.4 billion and $859 billion. The retail federation revised its forecast in December, saying the growth could hit as much as 11.5%. The latest sales data excludes automobile dealers, gasoline stations and restaurants "to focus on core retail," according to Washington, D.C.-based National Retail Federation. But there are economic concerns. The group issued its figures the same day the U.S. Census Bureau reported that overall retail sales in December were down 1.9% seasonally adjusted from November but were up 16.9% year over year. With sales slowing a bit at year-end, some retail analysts cautioned that the industry could be in for a bumpy ride even with the strong spending into Jan. 1. The group said headwinds will remain for retailers this year, even after the "outstanding" annual retail sales. "NRF expects further growth for 2022, and we will continue to focus on industry challenges presented by COVID-19, the supply chain, labor force issues and persistent inflation," NRF president and CEO Matthew Shay said in a statement. Neil Saunders, managing director of GlobalData, said this year the retail industry may not see as robust increases. "Growth rates across 2022 will be far more modest, although not disastrous," he said. "We also believe some money-saving behaviors, such as trading down to value lines and retailers, has already started to creep in. This matters because it is a step change from where we have been in the past 18 months, which is best characterized as a rapidly rising tide of spending that has floated most retail boats. If that starts to ebb, the weaker retailers will quickly become exposed." Pandemic Uncertainty National Retail Federation chief economist Jack Kleinhenz also offered an alert about retail challenges in 2022. "Holiday spending during 2021 reflected continued consumer demand that is driving the economy and should continue in 2022," he said in a statement. "Nonetheless, we should be prepared for challenges in the coming months due to the substantial uncertainty brought by the pandemic." Consumers shopping earlier, in November, contributed to the dip in December sales, "but the easing was not particularly pronounced and left December looking perfectly respectable against the lineup of other months in 2021," according to Saunders. He said that despite "last-minute panics about supply chains, COVID variants and staffing issues," total sales increased 16.9% over the same time in 2020, with Americans spending $103.6 billion more. Sales were also up by 20.9% compared to the same time in 2019, he added. "After a dispiriting holiday season in 2020, most shoppers were absolutely determined to enjoy themselves come what may and that had a positive impact in their spending habits. ... [And] a lot of households still have a buffer of savings from stimulus payments and reduced expenditure on areas like travel which they were willing, at least in part, to draw upon to fund a holiday-shopping spree," he said. Last year, the brokerage JLL created a term for the phenomenon of pent-up demand and consumers making up for the spending they couldn't do in 2021: "revenge shopping." ICSC, a major trade organization for the U.S. retail real estate industry, is slated to release its sales estimates for the holiday season next week. It had forecast that sales from holiday shopping would see an 8.9% increase in November through December versus a year earlier to $923 billion. Source: www.CoStar.com This press release was produced by the Elgin Area Chamber of Commerce. The views expressed here are the author's own.