Back-to-School Spending to Drop

The National Retail Federation (NRF) issued a report on 2013 spending expectations that states:

A combination of pent-up demand and a growing population of school children put 2012 back-to-school spending in the history books, leaving parents in 2013 with an array of school supplies that still work, and a significantly shorter shopping list. According to NRF’s 2013 Back-to-School Survey conducted by Prosper Insights & Analytics, families with school-age children will spend an average $634.78 on apparel, shoes, supplies and electronics, down from $688.62 last year. Total spending on back-to-school is expected to reach $26.7 billion.

Part of the core of these comments is that 2012 was so good that a drop in 2013 is not terribly bad. That assumes that a sharp drop is fine, if it is from a high base. However, such a substantial falloff cannot be painted as good, no matter what the reasons.

The NRF concedes that tax hikes for individuals will play a part in lower spending. That is contrary to many statements about the effects of these taxes. The auto industry says that higher taxes have not dented their sales. So would real estate agents. Apparently, according to these lines of thought, people will pay for expensive things, but not inexpensive ones. Or perhaps people are inclined to put their own needs above those of their children. Again, no matter what the cause, the NRF data should send a shudder down the backs of economists.

One of the findings in the NRF study is more alarming than others. Students at the end of their college careers have turned worried:

The survey found college seniors and their families will spend slightly more than last year ($702.81 vs. $680.70) but will look for ways to cut corners because of the state of the economy. Specifically, 44.8 percent plan to make do with last year’s items, up from 38.9 percent last year, and more than half (51%) will spend less overall on the items they do buy, up from 42.6 percent last year.

The probable cause of this is that many of these students do not have jobs waiting for them as they leave school. Evidence from government data support that. People in their late teens and early twenties have a high unemployment rate, compared with much of the population. Many of these students will move back with their parents, because they cannot live anywhere else.

The headwinds among the large shopping population likely will continue. The next market from the NRF will be Halloween spending. The report on those figures will be out in three months. These will tell whether school shopping numbers are an aberration or whether the caution has spread. If people still believe their incomes and jobs are in jeopardy, the figures will be no better than for back-to-school.