WASHINGTON -- Growth in U.S. holiday retail sales this year was
the weakest 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%, compared with last year. Many analysts had
expected holiday sales to grow 3 to 4%.
In 2008, sales declined by
between 2% and 4% 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% and 5%, according to
ShopperTrak, a separate market research firm. A 4% 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.
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% 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.
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.
by consumers accounts for 70% 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.
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.
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% 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.
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% 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
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.
were weakest in areas affected by Sandy and a more recent winter storm
in the Midwest. Sales declined by 3.9% in the mid-Atlantic and 1.4% in
the Northeast compared with last year. They rose 0.9% in the north
central part of the country.
The West and South posted gains of between 2% and 3%, still weaker than the 3% to 4% increases expected by many retail analysts.
sales, typically a bright spot, grew only 8.4% from Oct. 28 through
Saturday, according to SpendingPulse. That's a dramatic slowdown from
the online sales growth of 15 to 17% 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% of total holiday business.