Retail's tug of war has begun, and it's shaping up to be a draw.
One on end of the rope is a tightening labor market, rising home values and seasonal gas prices that have hit an 11-year low. On the other end is an uncertain stock market, slowing global growth, and a consumer base that is shelling out more on rent and experience-based purchases.
The end result, according to three separate sales forecasts released Wednesday, is a holiday season that shouldn't cause retailers to hit the panic button—but also doesn't signal robust growth.
"Ultimately we're seeing a holiday that's going to be a fair amount below the trailing five- and 10-year averages," said Noam Paransky, director in the retail practice at AlixPartners consulting firm. "It's certainly not going to be a holiday for the ages."
By using a model developed in 2012, which has determined that 66.2 to 66.4 percent of annual retail sales occur through August, AlixPartners predicts holiday sales will rise between 2.8 and 3.4 percent during the November to December period. That would compare to 4.4 percent growth last year (both figures exclude motor vehicles, food services and dining, and gas stations).
Similarly, Deloitte's holiday forecast (which excludes motor vehicles and gasoline) calls for a sales increase of between 3.5 and 4 percent from November through January—a growth rate below last year's 5.2 percent gain.
Deloitte's estimate includes the month of January, to account for purchases made with gift cards. Sales from gift cards, which account for roughly $30 million in consumer spending each holiday, are not included in companies' results until the cards are redeemed.
"While retail holiday sales are expected to rise, the increase may be smaller than last year due to the lingering effects of flat personal income growth in the first quarter," said Daniel Bachman, Deloitte's senior U.S. economist.
Although the broader economy is improving, there are issues weighing on both high- and low-income consumers. For the average U.S. household, Rod Sides, leader of the retail and distribution practice at Deloitte, said personal income growth (or in this case, the lack thereof) typically correlates more closely with spending patterns than market volatility.
But AlixPartners' Paransky emphasized that the high-end consumer, who tends to be the one investing in the market, "has been carrying quite a bit of the weight in retail activity for the past few years." As the market continues to wobble, wealthy consumers could rein in their spending, Paransky said.
His hypothesis is backed up by a separate report released Tuesday by the American Affluence Research Center. According to the AARC, holiday gift spending by the 12 million U.S households with a minimum net worth of $1 million is expected to reach an average $2,749 this year. Although that would represent 4 percent growth, it's a deceleration from last year's actual reported spending of nearly 6 percent.
Ron Kurtz, president of the research organization, noted that respondents typically end up spending more than they say they will. Still, he expects market volatility to negatively affect the mood of the wealthy, he said.
AARC estimates that the amount spent on holiday gifts by the affluent will be about four times that of the average U.S. household. Overall, it said these households account for about 40 percent of consumer spending.
"They understand that there's a slowing global economy and that threat may impact their next couple of years," Paransky said.
Aside from economic concerns, consumers are also spending a larger share of their cash on travel and dining out, and less on material objects. And while inflation remains fairly low, they're also shelling out significantly more on rent.
According to a report released Tuesday, a growing number of U.S. households are putting more than 50 percent of their income toward paying rent.
"That's certainly going to have an impact on what consumers are willing to spend," Sides said.