U.S. consumers, bolstered by growth in jobs and disposable income, are likely to loosen their wallets and push holiday sales up 3.6 percent, the leading retail industry group said on Tuesday.
The National Retail Federation forecast sales of $655.8 billion for November and December, excluding autos, gasoline and dining out. This implies significantly higher growth than the 10-year average increase of 2.5 percent and 3 percent in 2015.
The forecast is an economic benchmark for the holiday season, which can account for 20 to 40 percent of annual sales for many retailers. Consumer spending accounts for about 70 percent of gross domestic product.
"Our forecast is reflective of the growth in the economy. ... Consumers are in a stronger position compared to where they have been over the last few years," federation Chief Executive Matthew Shay said on a media call.
Wage growth, stronger job creation and low inflation have all contributed to the economic momentum, he said.
Online sales will rise by 7 percent to 10 percent during the holiday season to as much as $117 billion, the group said.
U.S. retail sales in August fell 0.3 percent, more than expected, on weaker demand for automobiles and other items after an upwardly revised 0.1 percent gain in July.
Growth this year has been driven by lower-income consumers who favor retailers like Wal-Mart Stores Inc as retailers raised wages and unemployment fell.
Sales have not been as strong at department stores like Macy's which cater to middle-income shoppers.
Jack Kleinhenz, chief economist of the federation, said issues like the presidential election could affect spending in a few states and communities as political uncertainty may force some consumers to hold back on their purchases. However, it will not impact their overall holiday spending plans, he said.
Kleinhenz said he expected consumer spending to continue a two-year trend of shifting from goods toward services like dining and travel, he said.
The first major shopping weekend of the holiday season, which includes Black Friday, may remain subdued but will not reflect this season's results, the retail group said.
Black Friday, the day after Thanksgiving, has for decades been regarded as the start of the holiday shopping season, but growth in early discounts and online shopping has reduced its significance for U.S. shoppers.
The National Retail Federal said it expected retailers to hire 640,000-690,000 seasonal workers, similar to levels in the past couple of years.
Other retail forecasts also expect a pickup in holiday sales. Deloitte's retail group predicted gains of 3.5 to 4 percent, and consulting firm AlixPartners estimated growth of 3.3 to 4 percent.
(Reporting by Nandita Bose in Chicago; Editing by Lisa Von Ahn and Richard Chang)