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Fung Group: Retailers Surprisingly Bullish on Holiday

The holiday season may bring some much needed jolliness to retailers.

Nearly three-quarters of the retailers Fung Global Retail & Technology and First Insight surveyed this month said they were optimistic about holiday, and one-third even said they were “extremely” optimistic.

The reason for the positive sentiment? According to those surveyed, the economy is on the rise, pricing has been adjusted to be more competitive, companies are leveraging omnichannel offerings and product lines have been expanded.

More than half of the retailers said business would be up at least 5 percent this holiday season over last. If so, growth would beat the 3 percent sales gain 2015 had over 2014, according to the National Retail Federation’s (NRF) 2016 Retail Planning Playbook.

The U.S. presidential election, which will have been decided before holiday buying is fully underway, has retailers divided as to what effect it will have on consumer spending.

Roughly 65 percent think the election will likely have a negative impact on holiday sales and 7 percent saying it would have a “very negative” impact. Twenty-one percent, on the other hand, said the election results would likely have a positive effect on sales.

“There is evidence that presidential elections affect shopper traffic in the period leading up to an election, on the day of an election and in the weeks following,” Fung Global reported. “Mall traffic decreased before the election and during the week of the election in each year.”

Before the election in 2012, research by ShopperTrak found that retail traffic fell 6.1% two weeks before election day and decreased 12.9% one week ahead of the big day. During the election week, traffic dipped 12.4% year over year.

Gas prices could play into the positive outlook for holiday, too.

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The cost of gas in the U.S. fell to an average $2.15 per gallon in the second week of August, an 18.2% drop over the same period last year. Prices for crude have fallen below the $40 per barrel benchmark, fueling an eight-week decline in prices at the pump—and prices are expected to fall even further. The U.S. Energy Information Administration says gas prices could average $2.06 per gallon in the rest of the year.

As such, more than 35 percent of respondents think the gas price decline will pad consumers’ pockets, encouraging them to spend more at retail for holiday.

In looking at other factors that affect how consumers spend at retail, like weather, the global economy, raw material prices, labor and Brexit, many retailers expect these factors will have more of a positive effect on sales than a negative one.

Thirty-two percent of retailers said changes in the global economy would positively influence holiday business, while 15 percent said it would have a more adverse effect. Twenty-six percent of respondents said fluctuating raw material prices would have a positive effect on retail, and more than 30 percent said available labor resources would be a good thing going into holiday.

Though Brexit has been the talk of the world in recent weeks, most retailers don’t think Britain’s decision to bail on the EU will have any effect on American holiday retail sales, while 20 percent said any effects would more likely be negative.