Holiday Retail Sales Growth Weakest Since 2008

By Daniel Wagner

U.S. holiday retail sales this year grew at the weakest pace since 2008, when the nation was in a deep recession. In 2012, the shopping season was disrupted by bad weather and consumers' rising uncertainty about the economy.

A report that tracks spending on popular holiday goods, the MasterCard Advisors SpendingPulse, said Tuesday that sales in the two months before Christmas increased 0.7 percent, compared with last year. Many analysts had expected holiday sales to grow 3 to 4 percent.

In 2008, sales declined by between 2 percent and 4 percent as the financial crisis that crested that fall dragged the economy into recession. Last year, by contrast, retail sales in November and December rose between 4 percent and 5 percent, according to ShopperTrak, a separate market research firm. A 4 percent increase is considered a healthy season.

Shoppers were buffeted this year by a string of events that made them less likely to spend: Superstorm Sandy and other bad weather, the distraction of the presidential election and grief about the massacre of schoolchildren in Newtown, Conn. The numbers also show how Washington's current budget impasse is trickling down to Main Street and unsettling consumers. If Americans remain reluctant to spend, analysts say, economic growth could falter next year.

In the end, even steep last-minute discounts weren't enough to get people into stores, said Marshal Cohen, chief research analyst at the market research firm NPD Inc.

"A lot of the Christmas spirit was left behind way back in Black Friday weekend," Cohen said, referring to the traditional retail rush the day after Thanksgiving. "We had one reason after another for consumers to say, 'I'm going to stick to my list and not go beyond it.'"

Holiday sales are a crucial indicator of the economy's strength. November and December account for up to 40 percent of annual sales for many retailers. If those sales don't materialize, stores are forced to offer steeper discounts. That's a boon for shoppers, but it cuts into stores' profits.

Last-minute shoppers like Kris Betzold, of Carmel, Ind., embraced discounts that were available before Christmas.

"We went out yesterday, and I noticed that the sales were even better now than they were at Thanksgiving," said Betzold Monday while shopping at an upscale mall in Indianapolis. Betzold, who said the sluggish economy prompted her and her husband to be more frugal this year, noted that she saved about $25 on a Kindle Fire she found at Best Buy.

Spending by consumers accounts for 70 percent of overall economic activity, so the eight-week period encompassed by the SpendingPulse data is seen as a critical time not just for retailers but for manufacturers, wholesalers and companies at every other point along the supply chain.

The SpendingPulse data include sales by retailers in key holiday spending categories such as electronics, clothing, jewelry, luxury goods, furniture and other home goods between Oct. 28 and Dec. 24. They include sales across all payment methods, including cards, cash and checks.

It's the first major snapshot of retail sales during the holiday season through Christmas Eve. A clearer picture will emerge next week as retailers like Macy's and Target report revenue from stores open for at least a year. That sales measure is widely watched in the retail industry because it excludes revenue from stores that recently opened or closed, which can be volatile.

Despite the weak numbers out Tuesday, retailers still have some time to make up lost ground. The final week of December accounts for about 15 percent of the month's sales, said Michael McNamara, vice president for research and analysis at MasterCard Advisors SpendingPulse. As stores offer steeper discounts to clear some of their unsold inventory, they may be able to soften some of the grim results reflected in Tuesday's data.

Still, this season's weak sales could have repercussions for 2013, he said. Retailers will make fewer orders to restock their shelves, and discounts will hurt their profitability. Wholesalers, in turn, will buy fewer goods, and orders to factories for consumer goods will likely drop in the coming months.

In the run-up to Christmas, analysts blamed the weather and worries about the "fiscal cliff" for putting a damper on shopping. Superstorm Sandy battered the Northeast and mid-Atlantic states in late October. Many in the New York region were left without power, and people farther inland were buried under feet of snow. According to McNamara, the Northeast and mid-Atlantic account for 24 percent of U.S. retail sales.

Buying picked up in the second half of November as retailers offered more discounts and shoppers waylaid by the storm finally made it into malls, he said.

But as the weather calmed, the threat of the "fiscal cliff" picked up. In December, lawmakers remained unable to reach a deal that would prevent tax increases and government spending cuts set to take effect at the beginning of 2013. If the cuts and tax hikes kick in and stay in place for months, many economists expect the nation could fall back into recession.

The news media discussed this possibility more intensely as December wore on, making Americans increasingly aware of the economic troubles they might face if Washington is unable to resolve the impasse. Sales never fully recovered, Cohen said.

The results were weakest in areas affected by Sandy and a more recent winter storm in the Midwest. Sales declined by 3.9 percent in the mid-Atlantic and 1.4 percent in the Northeast compared with last year. They rose 0.9 percent in the north central part of the country.

The West and South posted gains of between 2 percent and 3 percent, still weaker than the 3 percent to 4 percent increases expected by many retail analysts.

Online sales, typically a bright spot, grew only 8.4 percent from Oct. 28 through Saturday, according to SpendingPulse. That's a dramatic slowdown from the online sales growth of 15 to 17 percent seen in the prior 18-month period, according to the data service.

Online sales did enjoy a modest boost after the recent snowstorm that hit the Midwest, McNamara said. Online sales make up about 10 percent of total holiday business.

Daniel Wagner can be reached at www.twitter.com/wagnerreports.

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vlady1000

Let's see. No bonus this year, a 10% salary reduction this year, increased health prem's paid by the employees this year, higher co-pays this year, no more company gas card this year, company life insurance eliminated this year, company disability insurance eliminated this year, no 401K matching this year, but I did get inflation on almost everything I pay for this year.....................what a surprise it took less than 5 minutes for the family to open all the present this year.

December 29 2012 at 10:56 PM Report abuse +1 rate up rate down Reply
bcheerful3

Did they expect people to go out spending like drunken sailors funded by those real jobs they still don't have? What's that you say - corporate Amerika did not make up for it with annual bonus money buys? They are only one percent? But where's all the trickle down? Raise the rates, of food, gas, water, utilities on every level as well as medical care and what did they expect would happen- that we would crap nickles? Snap out of it!

December 27 2012 at 6:43 AM Report abuse rate up rate down Reply
Thrift Store

I have no pity for any democrat who had a crappy Christmas. They brought it on themselves for voting fo the ant economy party

December 27 2012 at 1:45 AM Report abuse -2 rate up rate down Reply
1 reply to Thrift Store's comment
bcheerful3

No we brought it on you. Glad to hear you still can't get over it. Read my lips YOU RAN A LOSER!

December 27 2012 at 6:44 AM Report abuse +2 rate up rate down Reply
orthodoxy76

Last year we spent $500 on Christmas...this year that is food for 3 weeks so we spent...$150 on Christmas.

December 27 2012 at 12:06 AM Report abuse +1 rate up rate down Reply
AL CONFER

America needs to realize that How many more taxes can we tolerate? Buy a loaf of bread, you've got a tax, gasoline, a tax, a car, you've got tax and the list goes on and on. How many programs are taxpayers paying for that makes absolutely no sense, like foreign aid, keeping the United Nations, we pay, others don't. We pay to subsidize others nations security, such as Japan, and mush of the rest of the world and why? These nations flourish, because we pay for their security. Why are Americans on welfare for generations, but those on unemployment are booted after six months? Illegal immigration, is taking tax paying jobs from legal Americans to be replaced by illegals that are paid under the table, many receiving welfare benefits because they are lying to get those benefits that no illegal should ever get. We have a very corrupt government that should be enforcing our laws, but choose to do a wink and a nod and legal citizens are paying when illegals are not paying, but getting. Look at the aid we give to nations that hate us, and yet we still give them aid and why? Why are we constantly looking at cutting benefits to those that are paying for those benefits and yet our government make the word entitlement a dirty word and yes they are entitled because they pay for their Medicare and also Social Security, while those on Medicaid and SSI pay nothing and you bet that is a dirty word because these people are in no way entitled, because it is just another welfare program. Working and retired Americans are going to revolt if they are the ones taking cuts, while those on welfare don't take the cuts they are not entitled to. Your only entitled if you pay and not entitled if your living off my tax dollars. Yes, I do expect you to work, take any work available. If found on drugs, your cut off all welfare period. Its way past time taxpayers are protected.

December 26 2012 at 10:29 PM Report abuse +3 rate up rate down Reply
democrackso

Pleeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeezzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz copy and paste something from moveon.org oh pleeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeezzzzzzzzzzzzzzzzzzzzzz

December 26 2012 at 10:19 PM Report abuse -3 rate up rate down Reply
democrackso

Where are the Obamites tonight? All the Obamites must be off playing with their Obama blow up dolls they got for Christmas.

December 26 2012 at 9:49 PM Report abuse -1 rate up rate down Reply
talari

Obama's destruction is on course.

December 26 2012 at 9:42 PM Report abuse -1 rate up rate down Reply
democrackso

drbuckles
Thanks to the Tea Publicans and McConnell intransigence we have a stalemate so that the wealthy Kochs and the Wall Street people can kill the economy for who's interests? Oh, it wouldn't be the middle classes would it? No, it's not them

++++++++++++++++++++++++++++++++++++++++++++++++++

drbumbles is another Obamite obsessed with koch. drbumbles deesn't realize that Obama wants the country to go off the cliff so taxes go up on everyone. drbumbles is worried that if the country goes over the cliff he won't get his welfare check.

December 26 2012 at 9:39 PM Report abuse -4 rate up rate down Reply
viking9343

Hi ho, Hi ho it's off the cliff we go!!

Look last summer they made a deal that if we raised the debt cieling they would raise ALL the taxes and cut spending.

So let the games begin!

December 26 2012 at 9:36 PM Report abuse -4 rate up rate down Reply
1 reply to viking9343's comment
talari

They're politicians... they lied.

December 26 2012 at 9:43 PM Report abuse -5 rate up rate down Reply