Holiday Shopping in U. S. Weakest Since 2008
12/31/2012, 12:08 p.m.
WASHINGTON -- U.S. shoppers spent cautiously this holiday season for the worst year-over-year performance since 2008, a disappointment for retailers who slashed prices to lure people into stores and now must hope for a post-Christmas burst of spending.
Sales of electronics, clothing, jewelry and home goods in the two months before Christmas increased 0.7 percent compared with last year, according to the MasterCard Advisors SpendingPulse report, the first major snapshot of holiday retail sales.
That was below the healthy 3 to 4 per cent growth that analysts had expected _ and it was the worst performance since spending shrank sharply during the Great Recession. In 2011, retail sales climbed 4 to 5 per cent during November and December, according to ShopperTrak.
This year's shopping season was marred by bad weather and rising uncertainty about the economy in the face of possible tax hikes and deep spending cuts early next year. Some analysts say the massacre of schoolchildren in Newtown, Connecticut, earlier this month may also have chipped away at shoppers' enthusiasm.
Retailers still have time to make up lost ground. The final week of December accounts for about 15 per cent of the month's sales, said Michael McNamara, vice president for research and analysis at MasterCard Advisors SpendingPulse.
Still, this season's weak sales could have repercussions for 2013, McNamara said. Retailers will make fewer orders to restock their shelves, and discounts will hurt their profitability. Wholesalers will buy fewer goods and orders to factories will likely drop in the coming months.
Steep discounts weren't enough to get people into stores, said Marshal Cohen, chief 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 the Thanksgiving holiday in late November. ''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 per cent 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.
Spending by consumers accounts for 70 per cent 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 released Tuesday captures sales from Oct. 28 through Dec. 24 across all payment methods. A clearer picture of holiday sales 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.
In the run-up to Christmas, analysts blamed bad weather for putting a damper on shopping. In late October, Superstorm Sandy battered the Northeast and mid-Atlantic states, which account for 24 per cent of US retail sales.