Economic Update: Holiday sales to be up, down, or even – how reassuring - SNEWS

Economic Update: Holiday sales to be up, down, or even – how reassuring

Everyone has a prediction for what holiday sales will bring, from the NRF to Deloitte to Retail Forward and, closer to home, Leisure Trends. Trouble is, predictions are all over the board, leading many to begin taking on a mentality of “I’ll believe it when I see it.” What should you believe? SNEWS has answers.
Author:
Publish date:

Consumer spending accounts for about 70 percent of the U.S. economic activity, and until consumers begin to spend again, any signs of an economic recovery will be muted. That means holiday spending forecasts have taken on a new level of importance. Trouble is, predictions are all over the board, leading many to begin taking on a mentality of “I’ll believe it when I see it.”

Here is a special SNEWS® summary of the latest key forecasts for the coming holiday season:

SNEWS® knows the current economic state is important for your business. This is one look at different ways it's affecting our industries and your business in a periodic and ongoing series of stories in SNEWS. This time around we take a look at forecasts for the coming holiday season, sizing up statistics and reports from research groups and forecasters. Stay tuned for more in-depth reporting on the current situation as it develops and changes, from interviews with experts, closer looks at small businesses and how they are coping, to economic statistics, breaking news and how it affects consumers.

Deloitte reported in late September that because consumers remain burdened by high unemployment, continuing home foreclosures, and restricted credit, holiday sales for November through January would be flat compared to 2008 with total sales reaching $810 billion. 2008 reported the first ever decline in holiday sales of 2.4 percent, according to research by Deloitte of the U.S. Commerce Department reporting back to 1967. www.deloitte.com/us/retail

Retail Forward reported in late September that for 2009, we will experience flat holiday sales when compared with 2008, which it said represented a 4.5 percent decline. It also went on to report that mass retailers, discounters, and club warehouse stores would enjoy a 2 percent increase in holiday numbers and that online sales would climb by 4 percent. Retail Forward also predicted that a sales growth trend should gain strength quarter by quarter in 2010. www.retailforward.com

Leisure Trends Group polled its MAAP consumer panel about holiday shopping, and found that active U.S. consumers are more optimistic about holiday spending than others it seems, with 52 percent saying spending will stay the same, compared to only 43 percent of the general population reporting the same level of holiday spending compared to 2008. Only 25 percent of active U.S. consumers will be decreasing spending, compared with 30 percent of the general population. www.leisuretrends.com

National Retail Federation released its report on holiday sales projections on Oct. 19 predicting that consumers will be bargain hunting and that, on average, the U.S. consumer will spend $682.74 on holiday-related shopping, down 3.2 percent from $705.01 in 2008. Retail sales during the November-December period are projected to decline 1 percent, to $437.6 billion, over the same period in 2008, the NRF also said -- far better than the 3.4 percent drop in 2008 at least. www.nrf.com

With Halloween behind us, and the holiday shopping days already ticking along, which study should we believe? Maybe a little of each since there is no doubt predicting consumer spending habits is about as easy as grabbing a greased pig at the local fair. We summarized similar reports in an April 17, 2009, story, “Confused about the economic forecast? Yeah, so are the forecasters.” Sometimes, to get a good picture of what is going to happen, you have to take the good with the bad and drink it all up. To that end, SNEWS® brings you some current facts, some good news, and some not-so-good news.

The facts:

  • Retailers are clearly compensating for anticipated soft sales this holiday season by cutting back on inventory. According to NRF’s Port Tracker report, released in September, traffic to the nation’s ports has scaled back to levels not seen since 2003. What this means is deals will be harder to come by for consumers. It also means that there will be less inventory to have to liquidate in the first quarter of 2010 assuming retailers guessed right with the inventory they did bring in for holiday selling.
  • Government reports show the saving rate, or the proportion of income left over after consumption spending and taxes, increased to 3.3 percent in September, compared with 2.8 percent a month earlier. That means U.S. consumers are saving more, even as the government is spending more, and, according to economists, that may be good for the long-term health of the economy, but it will not help businesses who are struggling to stay alive with flat to declining retail sales.

Good news:

  • A recent U.S. Commerce Department report showed that orders for big-ticket items such as cars and washing machines increased 1 percent in September. That same report indicated that a key measure of business spending rose, both of which seem to indicate that consumer and business confidence are inching back upward.
  • Economic and consumer confidence in the 16 European countries that use the euro improved for the seventh straight month in October. In a monthly survey by the European Commission, the overall Economic Sentiment Indicator for the euro zone rose sharply to a 13-month high of 86.2 from 82.8 in Sept. This bodes well for a global economic recovery which appears to be outpacing the U.S. recovery by several quarters.
  • A non-profit trends institute in Germany, GfK, reported on Oct. 26 a positive trend in spending in Germany has begun. Consumers are looking to a faster recovery process than initially forecast and are ready to participate, the group said. With that in mind, the economic prognoses, although still conservative, have been revised upward for the coming months.
  • The nonprofit National Bureau of Economic Research is typically the one to officially declare that a recession has begun and ended, and it has yet to weigh in on whether this current recession is over. Still, most economists appear to agree that the recession is, at least unofficially, over. It is predicted that when the NBER does declare the recession over, it will state it ended in June or July of 2009. Click here to see an Oct. 14, 2009, SNEWS story on what appeared to be the end of the recession, per economic experts. 
  • The price index for personal consumption expenditures (which excludes food and fuel purchases) slipped to 1.4 percent annually from 2 percent in the second quarter of 2009. As a strong measure of inflation used by the Federal Reserve, this indicates that the central bank will continue to prime the economy with interest rates hovering around zero percent.

And the not so good news:

  • Sales of new homes fell 3.6 percent in September the U.S. Commerce Department reported in Oct. noting that the initial sales-boosting effect of the federal government's tax credit for first-time home buyers has faded.
  • On Oct. 28, the Conference Board reported that its index of consumer confidence fell to 47.7 in October from 53.4 in September. Economists had been predicting the index would dip only slightly, to around 53.1. To put the index in perspective, a reading of 90 indicates an economy is on solid ground and 100 or more indicates economic growth. 47.7 is well below the 61.4 index report of fall 2008, right before Lehman Brothers collapsed and the economy completely tanked – resulting in the lowest every consumer confidence index of 25.3 in Feb. 2009.
  • On Oct. 30, the U.S. Commerce Department reported that consumer spending fell 0.5 percent in September. The decline in spending was being primarily attributed to a drop off in car sales the month after the Federal government’s "cash for clunkers" program ended. Spending on durable goods such as cars and other products designed to last more than three years fell 7 percent, more than erasing gains from a month earlier.
  • As of October nearly 10 percent of the labor force in the U.S. is currently unemployed, and wages and salaries continue to fall according to U.S. government reports. Unemployed people and those whose incomes have been reduced are far less likely to spend, even as a weakened retail economy desperately needs them to. Economists point out there is a bit of Catch 22 here – unless the economy recovers, new jobs and increases in wages will be harder to come by. However, it’s hard to spend to help an economy recover when you are out of work or your wages have been cut. 

Happily, we can see the above “not-so-good” news is still better than what we reported a year ago in an Oct. 27, 2008, story, “Our worsening economy: A snapshot of what the future may hold for our industries.” 

What do all the various bits of data and numbers mean for our economy and, more importantly, for the health of our industry (retail, supplier, manufacturer, distributor and rep)? Until U.S. consumers start to feel more secure about their job and wage future, it’s likely we’ll see the economic recovery in the United States look more like a line graph, sweeping upward and then downward, ever higher, but with enough fluctuations to drive us all batty for months to come.

Most economists agree that consumers are never going to go back to the free-spending ways that fueled the meteoric economic growth leading up to the crash. (Click here to see a May 18, 2009, SNEWS story, “Economic downturn may have lasting effect on consumer behavior.”) But, there are indicators in the numbers leading into the holiday season that consumers are starting to loosen the wallet ever so slightly. Although it does not show in the numbers, there are sufficient other reports that would indicate consumers will always be willing to spend hard-earned money if there is a compelling reason to spend for something that will improve quality and enjoyment of life. And that bodes well for specialty outdoor and fitness retailers that know how to make consumers feel special.

--Michael Hodgson

SNEWS is looking at different ways the economy is affecting our industries and your business in a periodic and ongoing series of stories. Stay tuned for more in-depth reporting on the current situation. Email us at snewsbox@snewsnet.com with any tips, comments or ideas on stories you'd like to see.

Related

Fitness holiday sales outcome up for grabs

With somewhat conflicting reports about Black Friday and holiday sales, SNEWS recently caught up with some specialty fitness equipment retailers across the country to get their take. Seems that many are hedging their bets."The customer is tentative, and sales this season have ...read more

Gift_box.jpg

Key strategies to prep for holiday sales success

Consumers are cautiously optimistic entering the 2010 holiday shopping season, according to the general consensus, so now is the time to strategize for this all-important season, developing a plan of attack and contingencies in advance. In its “2010 Consumer Shopping Habits ...read more