Inside This Issue - News
As holidays arrive, uncertainty prevails
November 29th, 2010
NEW YORK – With crunch time approaching for retailers and shoppers, conflicting forecasts made it difficult to gauge what to expect from the holidays.
The lack of consensus was somewhat puzzling in view of the rebound in October, which saw retail sales up sequentially 1.2% over September and 7.3% higher than October 2009, according to the Department of Commerce. Excluding auto and auto parts, retail sales were up 6% year over year, perhaps reflecting a slight improvement in unemployment.
It was the fourth consecutive month of increases and the biggest jump in seven months, sparking optimism in some quarters.
"Although still cautious and in search of value, the American consumer has returned," says Sandy Kennedy, president of the Retail Industry Leadership Association. "With four consecutive months of sales gains, retailers are happy to turn the page on the last three years and embrace a more optimistic future."
However, the Deloitte Consumer Spending Index continued to decline in October, largely due to ongoing softness in the housing market. "Although consumers have regained some of their purchasing power, many are holding back in anticipation of more positive movement in areas like housing and unemployment," says Carl Steidtmann, chief economist and author of the monthly index.
Consumers’ holiday outlooks appear sharply divided, depending on their economic situations. Deloitte’s annual holiday survey of consumer spending intentions finds the affluent (those with incomes of $100,000 and higher) predictably more optimistic and ready to splurge, perhaps because of much higher confidence (10 percentage points) in the security of their jobs than the average among survey respondents. Nonetheless, 62% of those polled plan to spend as much or more this year than in 2009, although fully half feel the economy is still in recession or headed back into one.
A holiday spending survey by Citigroup Inc. strikes a more downbeat note, finding 45% of respondents planning to spend less and just 7% expecting to spend more. Reflecting the division along income lines, the Citi survey found that 42% of households making less than $50,000 annually plan to cut back on holiday spending, compared with 28% among those making $150,000 or more.
One way that consumers apparently plan to contain their spending is by making less use of credit cards. According to the National Retail Federation, 43% of shoppers will rely on debit cards as their main form of payment, while 27.6% — the lowest level since 2002 — will charge their gift purchases.
One category that could see a surprising lift is apparel. According to the Lifestyle Monitor Survey conducted by Cotton Inc., clothing is the second-highest planned gift purchase, behind gift cards. Last year apparel trailed toys and electronics as well as gift cards.
Survey results have shown a steady rebound for apparel, with eight consecutive months of year-over-year increases in spending.