Macroeconomic Advisers has updated its holiday sales forecast in response to the report on retail sales through November.  Consumer spending is expected to push 2016 holiday sales to 3.5 percent above last year's level—0.4 percent below MA's prior forecast dated Nov. 23.

The markdown reflects some unexpected weakness in this morning's report on November retail sales.  The MA forecast of 3.5 percent growth of holiday sales would be a few tenths below the 3.9 percent average annual increase of holiday sales from 2010 through 2015.

"Supporting this solid holiday sales forecast are recent solid gains in payroll employment, disposable income and household wealth," said Chris Varvares, co-founder and senior managing partner of MA.  "Over the last 12 months, payroll gains averaged roughly 190,000 thousand per month, while real disposable personal income rose 2.7 percent."

Varvares explained that household wealth has been boosted by robust gains in house prices and broad equity values, with some measures of house prices up roughly 6 percent over the last 12 months and equity values—e.g., the S & P 500 Index—reaching new highs this week.

"Measures of consumer sentiment, as measured by the Conference Board and by the University of Michigan are in a range consistent with solid growth of consumer spending," Varvares explained. "Our holiday sales forecast is one-tenth below that of the National Retail Federation, which on Oct. 4 projected 3.6 percent growth of holiday sales this year."

"The MA holiday sales forecast is consistent with our latest tracking forecast of a 2.0 percent annualized increase in real personal consumption expenditures from the third to the fourth quarters of this year," Varvares pointed out.