Despite the initial numbers that suggested Americans were reaching for their wallets more this holiday season and even with those last minute rushes to wrap up their shopping, U.S. holiday retail sales grew less than even 2008, when news of the recession began sinking in. This is definitely not good for the economy and should be of big concern to lawmakers who still have not found a way to avoid the fiscal cliff in less than one week.
A new report released on Christmas day by MasterCard Advisors and Spending Pulse say this year’s shopping season was disrupted by both Mother Nature and human nature. The massive Hurricane Sandy that came ashore days before the election, the election itself and fears about the fiscal cliff all came together to keep this a brutally weak season. Even the most conservative analysts missed the mark. Holiday sales were up by less than one percent. 0.7% to be specific. Many believed we would see at least a 3% growth and many were hopeful it would be as high as 5%.
In late 2008, the financial crisis was front and center and consumers responded by clinging tightly to their wallets. This, of course, did not help the economy, but by 2010, we’d seen a four percent and five percent increase in November and December, respectively. Anything above four percent is considered a healthy growth.
Sandy
All one needs to do is seek out the most current photos of life after Hurricane Sandy to see the northeast continues to struggle to rebuild. Much progress has been made; however, there’s still much more left to do. In fact, more than seven years after Hurricane Katrina’s landfall in Mississippi and Louisiana there are still signs of residents attempting to rebuild. It’s going to be a slow process for those in the northeast.
Then came the Newtown Sandy Hook shootings earlier this month. The grief is indescribable and it’s caused many Americans to rethink their priorities. Many are reconsidering those expensive iPads and other gadgets for their little ones and instead are opting for more important investments of time together and less expensive gifts that solidify their values. Those iPads are being passed up for family-friendly ideas like good old fashioned board games. This likely will have passed by the time next holiday season rolls around, but this year at least, it’s a different perspective.
So how did so many get it wrong? It might be as simple as looking to Capital Hill. Few paid much attention to the fiscal cliff prior to the presidential elections. Once that had been decided, it was time to turn attention back to the expiring tax credits. No one believed it would be a cake walk, but no one expected it to drag into the Christmas season. But it did and here we are – one week before those tax credits expire, a group of politicians who are simply behaving badly and no solutions at all on the horizon. Consumers are worried. They can’t find clear answers on what this might mean. There are those who are convinced the bottom will fall out and then there are those who are giving lawmakers a pass by saying it’s not going to amount to much anyway; and still…consumers remain weary.
Big Savings
Those incredible 70% and 80% off sales weren’t enough either. The steep discounts were being offered to lure shoppers into retailers in hopes of finding those last minute gifts and giving a final boost to their bottom lines before everyone retired to their homes, Christmas trees and family dinners. It just wasn’t enough though. Marshal Cohen, chief research analyst at the market research firm NPD Inc., said,
A lot of the Christmas spirit was left behind way back in Black Friday weekend. We had one reason after another for consumers to say, ‘I’m going to stick to my list and not go beyond it.’
Now, concerns are that the collective cautious consumer will take these more reserved spending habits into the new year, which could play a role in how well or poorly the economic growth progresses.
Remember, retailers rely on the last two months of the year to up their annual sales by up to 40%. When that doesn’t happen, we begin seeing those 80% off sales, which is good for consumers, but not so much for retailers and the economy. For those procrastinators, though, this was a good deal for them and likely the only procrastination pays off. Shoppers on Monday said they found better bargains than what was even offered on Black Friday. Everything from Kindles to iPads to clothes were easily found with heavy discounts.
As consumers, our spending accounts for 70% of the economy; clearly this trickling growth isn’t going to improve the economy, the job market or any other retail driving dynamic.
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