Mixed holiday signals

Nov. 22, 2005
Two prominent economic sources are presenting contradicting opinions on the fate of the 2005 holiday shopping season

Two prominent economic sources are presenting contradicting opinions on the fate of the 2005 holiday shopping season.

On one hand, the National Retail Federation (NFR) is predicting 2005 holiday sales will trump last year’s by 6%. That would mean retailers will continue to scramble to replenish inventories post-holiday, which would keep trucking capacity tight and rates high well into 2006.

On the other hand, The Conference Board expects U.S. households to spend an average of $466 on gifts during the holiday season, a 2.1% drop from year’s estimate of $476.

The bullish outlook

“Recent consumer spending has surpassed our expectations and we expect this momentum to continue through the holiday season,” said NRF president & CEO Tracy Mullin. “Though our forecast remains cautious, we are confident that the holiday sales increase will be better than we originally anticipated.”

In October, retail industry sales rose 7.2% year-over-year, following strong 7.2% year-over-year growth in September. The holiday season is the most important time of year for the retail industry as companies see one-fifth of their sales occur in the months of November and December, NFR said.

…and the bearish

The Conference Board concluded consumers would tighten their belts based on a survey of holiday gift-spending intentions that covers a nationally representative sample of 5,000 U.S. households.

“Consumers appear to have less Christmas spirit heading into Thanksgiving this year than last year,” said Lynn Franco, director of The Conference Board Consumer Research Center. “This cautious attitude will have consumers shopping for bargains this season. Retailers will need to offer discounts and promotions to get shoppers into their stores.”

Internet shopping on the rise

Both NRF and The Conference Board agree on one thing: consumers are increasingly embracing the Internet for holiday shopping.

About 34% of all consumers will buy holiday gifts on the internet, up from 33% a year ago, The Conference Board said.

Hot on the heels of Black Friday-- the day after Thanksgiving and known for being one of the busiest shopping days of the year-- retailers have coined a term to represent its online shopping counterpart, Cyber Monday (the Monday after Thanksgiving).

According to a recent survey, 37% of consumers said they will use Internet access at work to browse or buy gifts online this holiday season.

Books top the list of online holiday buying, with nearly 45% survey respondents saying they will buy books as gifts, The Conference Board said. Clothing and shoes rank next as online holiday buying choices, followed closely by toys.

About the Author

Terrence Nguyen

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