The holiday shopping season is upon us again, but with economic hardship caused by the ongoing pandemic, there is some concern as to whether this retail season will be merry and bright. Holiday sales, as defined by the National Retail Federation (NRF), are typically measured from November 1 to December 31 and include a broad swath of retail sales except auto dealers, gasoline stations and restaurants. By the NRF’s calculation, holiday sales have averaged about 19% of annual retail sales over the past five years, and grew by about 4.1% y/y in 2019. However, with enhanced unemployment benefits expiring last summer, additional pandemic unemployment programs set to expire at year-end, and little concrete progress on a follow-on fiscal package, households continue to struggle.

Yet, retail sales are 4.9% higher than February pre-pandemic levels through October, driven by strength in autos, food and beverage, furniture, sporting goods, games, and book stores. The strength of goods consumption reflects the outperformance of goods over services throughout this pandemic, as highlighted in the chart below. Goods consumption has recovered beyond its pre-pandemic levels, while services still lag behind. This is a challenge for the overall recovery because services consumption is nearly double goods consumption. However, during the holidays, electronics, appliances, sporting equipment, jewelry and apparel are often popular gifts. 

Some may be hesitant to shop in stores amid a surging pandemic, but online sales will likely be robust this season. E-commerce accounted for 20.1% of total holiday sales in 2019 according to the NRF. Non-store retail has already jumped 28% over pre-pandemic levels per the U.S. Census Bureau. In-store pick-up should also continue to grow in popularity. 

Goods and services consumption during the pandemic

Feb. 2020 = 100

Source: (Chart) Bureau of Economic Analysis, (Text) National Retail Federal, U.S. Census Bureau