The numbers are in for U.S. holiday retail sales this year and are fueling concern that the nation may be in for weak GDP growth in 2013. A number of reports have been released since Christmas Day, and they share something in common- disappointing growth in retail sales that is far-below the projected sales totals for this holiday season.
MasterCard released its SpendingPulse report Wednesday that included holiday sales of electronics, clothing, jewelry and home goods in the two months before Christmas. Consumer spending rose 0.7 percent from the year before, but that number was far below the 3 percent to 4 percent growth that analysts had expected.
The increase year-to-year was the weakest since 2008, which saw a 5.5 percent decline from 2007. That was the first holiday season of the Great Recession, since then retail sales have seen slow but steady gains, until this season. This year’s 0.7 percent increase is a decline of about 65 percent from the 2 percent gain in 2011 from 2010.
The International Council of Shopping Centers also said Wednesday that retail sales for the week ended Dec. 22 were up just 0.7 percent. The trade group tracks more than 25 chains and has projected December sales to increase 4 percent to 4.5 percent. ICSC Chief Economist Michael Niemira pointed out that comparisons between this years and last is unfavorable for 2012 because the week ended on Christmas Eve last year. He also said in a statement that “we are holding to our expectations for the month.”
ShopperTrak, which tracks retail foot traffic at 40,000 U.S. retailers, cut is forecast for November-December holiday sales to a 2.5 percent gain, from a previous estimate of 3.3 percent growth.
The National Retail Federation held to its forecast of an increase of 4.1 percent from last year, compared with the previous year’s 5.6 percent gain.
While the numbers vary among the reports two things are consistent:
– Growth for 2012 is less than growth for 2011
– Analysts’ projections for this year’s holiday sales growth were generally 4 percent to 4.5 percent- actual growth is likely going to be less than half that projection.
Some of the contributing factors to the less than expected growth is the pace of job creation (which shows no signs of accelerating), concerns over the coming “fiscal cliff”, consumers reduced use of credit cards and Hurricane Sandy. Even with unemployment dropping from 8.5 percent in December of 2011 to 7.7 percent last month, consumers aren’t spending at the projected rate.
Fed Chief Ben Bernanke said weeks ago that the fiscal cliff was “already hurting the economy by reducing consumer and business confidence” and with the end of the year approaching and little progress in averting the coming fiscal calamity consumers are less willing to spend. November and December sales account for up to 40 percent of annual sales for many retailers, and the lack of consumer spending could cause the U.S. economy as a whole to contract.
The impact of the slower growth is already being seen as stores have been forced to offer deeper than anticipated discounts, which then cuts into their profits and leads to reduced revenue. Manufacturers, wholesalers and other companies in the supply chain will face the consequences in the first part of 2013.
Add the most recent Consumer Confidence report to the mix and 2013 looks to be one in which retailers will see a slowing in consumer spending, which accounts for 70 percent of economic growth. The Thomson Reuters/University of Michigan issued a report on December 21st that showed consumer confidence at a 5 month low.
From the Report:
“Consumers were more pessimistic about their future finances, and more pessimistic about the outlook for the overall economy and job prospects. One-in-four consumers spontaneously mentioned hearing about prospects for higher taxes when asked to identify what economic news they had heard, the highest level ever recorded.”
“Consumers are likely to reduce purchases if income or payroll taxes increase in 2013.”
These reports suggest consumers are watching the faltering fiscal cliff negotiations and, combined with a sluggish jobs recovery, the result is growing consumer worry about what lies ahead in the coming year. Retailers have one week remaining to close the gap from actual retails sales to projected sales and if the economy is to see any significant improvement in growth in 2013, sales need to be strong in this final week of 2012.
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