Tony Crescenzi came up with this list of net positives for the shopping season; He calls these factors likely to boost holiday sales this year.

I have been negative as to the prospects for the economy next year, but short term positive on the market’s year end rally and a decent (but not great) holiday shopping season. I expect this year’s sales increase will NOT be more than last year’s 6.5% gains — I expect moderately less, in the 3.5 – 4.5% range. (I’ve gone over the negatives enough that it would be redundant to do so here).

So this piece can be considered equal time for a more bullish view. (Crescenzi does list other bearish factors).

Here’s his list of positives:

    1. The economy added 1.6 million jobs in the first 10 months of this year (a figure weighed down by hurricane-related filings following an increase of close to 2.2 million in 2004.

    2. Income growth has been running at a pace of faster than 6%, nearly 1% above the long-term average. Given the low savings rate, this should translate into more spending.

    3. Housing turnover reached a record high this year, and this tends to correlate strongly with retail sales activity. That said, housing-related spending is likely to be slower next year.

    4. The three-month change in equity prices is very strong, and there tends to be strong correlation between equity prices and retail sales activity.

    5. Well-managed inventory levels will mean fewer drastic markdowns when compared with past years. This will boost nominal sales.

    6. Retailers are set to capitalize on the relatively recent surge in the use of gift cards. This means that they will have their inventory levels positioned accordingly. Many of these sales will take place at favorable average ticket prices, recognizing that consumers aren’t as price sensitive when using gift cards. This will boost nominal sales.

    7. Hurricane-related expenditures will occur concomitantly with holiday shopping and therefore will boost retail sales figures.

    8. There is one additional shopping day this year between Thanksgiving and Christmas, and there will be one extra Saturday in which to shop, albeit Christmas Eve.

    9. Microsoft’s new Xbox 360 will boost interest in its realm and give a boost to sales of electronic goods. Similarly, the digital age is still in the midst of an up-cycle with digital cameras, handheld devices and associated products and peripheral equipment likely to continue to see strong sales. Big-ticket items such as large-screen televisions are also expected to see strong sales and boost nominal retail sales.

    10. Well, just because (whoever heard of a top-nine list?).

Nicely done!

>

Source:
Holiday Spending and the Economy
Tony Crescenzi
RealMoney.com, 11/25/2005 9:09 AM EST
http://www.thestreet.com/p/rmoney/crescenzioncredit/10254334.html

Category: Retail

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6 Responses to “10 Factors to Watch this Holiday Shopping Season”

  1. Bruce Sherman says:

    I certainly hope that Tony Crescenzi is correct but I wonder what he thinks about the following factors:

    1.The consumer is greatly over-extended. Besides the zero savings rate, household debt is at record levels.

    2. The impact of rising short term interest rates on credit card balances, home equity lines and ARMs.

    3.The fact that credit card issuers will be raising the minimum monthly payment on all credit card balances before year end. This will significantly increase the amount that people must pay each month–even before taking higher interest rates into account.

    4.High gasoline and home heating costs.

    5. The increased tax bite caused by the AMT (admittedly, this won’t start hitting people until Spring, 2006).

    6. The actual and psychological impact of highly publicized layoffs (GM, Ford, Merck, Pfizer, etc).

    All of these factors will be pulling money out of the average Joe’s pocket and that can’t be good for consumer spending. Even if the Christmas shopping season somehow does manage to overcome these hurdles, what does all this say about 2006?

    Bruce Sherman
    Oakland, Oregon

  2. nate says:

    i watched kramer over the the holidays and found his review of the Galyan’s situation to be interesting.

  3. nate says:

    cramer, not kramer

    apologies.

  4. VJ says:

    Well, after all the initial bravado about how good Black Friday was for retailers, NBC Nightly News reported this evening that Black Friday’s sales were DOWN from last year. Remember that last year, Black Friday’s sales were the high point of the holiday season, and it was all downhill from there.

    Not a very auspicious start.

  5. Mike says:

    Nate is incorrect. The high point for shopping last holiday season was the last Saturday before Christmas.

  6. VJ says:

    Clarifications:

    Mike,

    I believe you were referring to my post.

    I wasn’t referencing daily sales. I’m quite aware that the Saturday before last Christmas was the best single daily sales from last season. I merely meant that the total overall season’s sales went downhill from last year’s Black Friday onward.