"There are a lot of reasons to be optimistic about holiday shopping this year, largely because American consumers are backed by strong demand fundamentals," said Sal Guatieri, Senior Economist, BMO Capital Markets. "With unemployment rates reaching 17-year lows, consumer confidence at 17-year highs and household wealth at record highs, we expect the 2017 season performance to be the best since 2014, with sales rising at a solid four percent annual rate."

Looking forward, BMO experts expect continued challenges for traditional brick-and-mortar retailers, but also see significant opportunities as e-commerce players leverage technology to improve service and reduce prices.

"Amazon has been a retail disruptor and a major driver of the growth of e-commerce in the United States," said Dan Salmon, Analyst, BMO Capital Markets. "Shopping through Amazon has increasingly become the preference for many Americans, as the company utilizes artificial intelligence and other technologies to improve logistics and keep prices competitive. With strong quarterly growth in the sector, continued increase in Prime memberships and perks, the outlook for this e-commerce giant is strong."

E-commerce across the United States, in general, is in the midst of a strong year, growing at a steady annual rate of around 15 percent.

"As e-commerce continues to grow faster than traditional retail sales, we will see positive implications for industries such as packaging, shipping and warehousing," said Mr. Guatieri.

For the toy industry, movie fatigue has cut into manufacturers' potential sales. But, innovative toys profiled through social media, early rising toy sales starting in September and continued massive growth from board games will keep this year positive.

BMO Toys and Leisure Senior Analyst Gerrick Johnson forecasts a fourth consecutive year of growth in 2017 at around 1.5 percent, given early indications.

"Innovation is at the heart of growth in the industry this year," said Mr. Johnson. "From privately-owned companies taking advantage of nimble business, to the surge from a new genre of board games (called table top games), companies that are innovating are growing."

After three years of above-average growth in toy sales during the holiday season, relative soft growth in 2017 can be attributed in part to "movie fatigue".

"We have far more movie toys than in past years and they have not been driving the sales that many toy companies anticipated," said Mr. Johnson. "Too many movies released one after another without new characters that resonated with kids became a bad bet for many major toy manufacturers."

Mr. Johnson cites smaller private companies as the key performance drivers this year, creating and marketing toys coming out of untraditional places like social media and YouTube. "Kids are discovering toys through YouTube and Instagram, watching unboxing and toy explanation videos. The concept of play through social media is emerging and is already affecting the market in a positive way. We expect that trend to continue through this holiday season."

BMO Capital Markets experts forecast the following trends ahead of the U.S. holiday shopping season:

Sal Guatieri, Senior Economist, BMO Capital Markets:

• The economy continues to churn out a decent number of jobs (around 170,000 on average this year), enough to drive the jobless rate down to near 17-year lows.

• Wage growth has picked up this year. The Atlanta Fed's wage measure shows the strongest gains in eight years at over three percent. The number of Americans who remain on unemployment insurance is the lowest in more than four decades.

• Anticipation of sizeable tax cuts from Congress could pull some spending forward.

• Record-breaking stock markets should lift household wealth and confidence, supporting holiday spending.

• Overall, we should see American retail sales (excluding autos and gas stations) grow at a solid four percent annual rate this holiday season (covering November/December) compared with 3.8 percent last season.

Gerrick Johnson, Analyst, Toys and Leisure

• BMO expects U.S. holiday sales to grow 1.5 percent this year. This slowdown in growth from the last few years is owing to "movie fatigue" and the glut of movie themed toys on the market.

• Top items this year include Fingerlings by Wowwee, LOL Surprize by MGA Entertainment, Hatchimals by Spinmaster, JoJo Siwa dolls by Just Play, PJ Masks  by Just Play, Luvabella by Spinmaster, and POP! By Funko.

• For the year, 1.5 percent growth represents the fourth consecutive year of growth – the first time this has happened in almost 20 years.

• The toy industry is benefiting from strong innovation, especially from smaller private companies who turn toward untraditional sources for toy ideas.  We also continue to see a trend within toys towards family-based activities, which is helping to drive growth in certain categories like board games and construction.

• An uptick in birth rates over the past few years as well as the growing proportion of older parents is helping toys sales, especially in the pre-school range. Other strong categories include dolls, collectibles and outdoor toys.