In the US, the back-to-school season is in full swing, and the National Retail Federation (NRF) forecasts that shoppers will shell out a total of $28 billion on school-related items this year. This total excludes back-to-college spending, which the NRF predicts will be worth another $55 billion to US retail. As substantial as these estimates are, the NRF expects back-to-school spending to be down marginally versus last year, when it reached an estimated $30 billion. The NRF bases its forecasts on its consumer surveys, which asked shoppers to predict how much they would spend on school- and college-related items this year.

Given the broader economic context, we are less pessimistic about back-to-school sales, and we see little reason for shoppers, in aggregate, to cut back. In fact, we forecast a 3%–4% year-over-year uplift in back-to-school sales, for five primary reasons:

  1. Most importantly, we are seeing strong demand in US retail. Total retail sales excluding autos and gasoline were up 4.5% in the first half of the year, and sales of discretionary goods such as apparel, electronics and furniture accelerated even as gas prices rose and threatened to pinch consumer spending.
  2. Unemployment is low, registering at 3.9% in July, versus 4.3% a year earlier.
  3. Consumer confidence is up, measuring 97.9 in July versus 93.4 last July, per the University of Michigan Index of Consumer Sentiment.
  4. Wage growth is solid, registering 2.7% in July, versus 2.5% a year earlier.
  5. Critically, total spending on clothing and footwear is accelerating, according to the US Bureau of Economic Analysis. This long-moribund category saw consumer demand jump by 4.1% year over year in the second quarter. Apparel is a core back-to-school category, accounting for an estimated 35% of total spending, per the NRF.


So, what are the negatives? And in a retail sector growing at around 4.5%, why are we forecasting “only” a 3%–4% increase in back-to-school sales? We consider two factors as potential negatives:

1. Gas prices have been rising strongly and were up 24% year over year in June. Traditionally, higher gas prices act as a strong drag on discretionary retail sales. So far this year, we have seen a countercyclical trend of strengthening discretionary sales, but sustained increases in gas prices could take the edge off further discretionary growth.

2. Retail sales increases are being supported by big-ticket categories that are unrelated to back-to-school season. Home improvement and furniture are among the categories supporting total retail growth, and few shoppers will be visiting these kinds of stores for back-to-school purchases.

Overall, though, we see many more reasons to be optimistic than pessimistic this season. One final data point that underscores this positivity is a survey finding from Prosper Insights & Analytics: when the firm surveyed US shoppers in June about their back-to-school spending intentions, a net 22.8% said that they expect to spend more this year than they did last year.

Other pieces you may find interesting include: Amazon Is Playing Its Part in Changing the Back-to-School Shopping SeasonThe Holidays, Black Friday and the Discounting SpiralUS Back-to-School 2018: A Review of Fashion Trends and Apparel SpendingUS Back-to-School 2018 Digital Trends: Shoppers Turn from Social Media to M-Commerce, US Back-to-School 2018 Retail Outlook: Shoppers Look Ready to Spend.

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