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U.S. Retailers Should Expect A ‘Cheerful’ Holiday Sales Season — IHS Markit

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U.S. Retailers Should Expect A ‘Cheerful’ Holiday Sales Season — IHS Markit

(Kitco News) - Even though U.S. retail sales will not beat last year’s performance – the strongest in more than a decade – the 2018 holiday season will still be a “cheerful” one, IHS Markit said in its outlook.

Retail sales during the winter holidays will grow 4.4% over last year, which saw a 5.7% increase — the best results since 2005, said IHS Markit associate director James Bohnaker in a report published on Wednesday.

Online shopping will be one of the biggest winners this year, accounting for 18.9% of all holiday retail sales, up from 17.8% reported last year, Bohnaker pointed out.

Solid gains in the U.S. employment sector are the primary driver behind this positive outlook, according to IHS Markit.

“High employment, rising incomes and elevated consumer confidence are steering the holiday retail outlook steadily forward. The sharp decline in retail gasoline prices in the last few weeks will add to these positives, giving consumers more spending money over the holidays and freeing up a bit more cash for gift buying,” Bohnaker said.

But this year’s solid results will not beat the 2017 surge, which was triggered by the anticipation surrounding tax cuts, he added.

“The initial sugar rush from personal income tax cuts began late last year, as consumers anticipated the benefits of lower tax rates before they went into effect in January. This propelled 2017 holiday sales to the strongest performance since 2005 at 5.3% year-over-year growth, setting a high bar for holiday sales this year,” Bohnaker wrote.

So far this year, retail sales were “soft” in key holiday categories and there was less rebuilding from hurricane damage, the IHS outlook noted.

“Hurricanes Florence and Michael did not cause as much property damage as the 2017 storms,” Bohnaker said. “It [is] unlikely that holiday sales growth will suddenly accelerate in year-over-year terms.”

The biggest risk to IHS’ retail sales outlook is another major sell-off in the U.S. equity space, warned the associate director.

“The S&P 500 has essentially erased the entirety of its 2018 gains in the past six weeks. The recent pullback may cause shoppers to think twice before making large purchases or upgrading from generic to luxury brands this season,” he said.

What does that mean for gold?

Healthy retail sales would, in the long-run, be negative for gold prices, said IHS Markit senior associate KC Chang.

“A healthy U.S. consumer will likely keep the U.S. Federal Reserve on its current path of tightening monetary policy. Higher interest rates would keep gold prices toward the $1,200/troy oz range,” he told Kitco News on Wednesday.

At the time of writing, gold prices were holding steady and not letting go of their most recent gains. The December Comex gold futures were last at $1,227.90, down 0.01% on the day.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.