A Ray Of Hope For Christmas Cheer

Most estimates are that there will be a very modest rise in consumer spending this holiday season which either began at the start of November or will begin the Friday after Thanksgiving, depending on which analysis is used.

If the improvement is modest, it will not do much for retailers who have faced lean holiday sales for the past two years.  It seems that it could be decades until shoppers flock to stores at the levels seen in 2006 and 2007.

But, there is a sign that spending will improve. A new Gallup poll shows a relatively large jump in what people will spend for Christmas this year. The increase could be enough to help retail margins because so many merchants, both large chains and small stores, have cut their costs to the bone.

Gallup reports:

According to Gallup modeling, if the figure holds at this level through December, that would point to a roughly 2% year-over-year increase in holiday sales. Further, if consumers’ spending estimate increases between November and December, as it typically does, actual retail sales could improve by closer to 4%, similar to the long-term average.

It may not seem like much of an improvement, but if sales remain flat compared to last year, retail margins might be too little to sustain some firms.

And there has never been a guarantee that unemployment and consumer leverage would not push spending back toward 2008 levels. But, it seems that will not happen and the holidays may hold something more for retailers than lumps of coal in their stockings.

Although the majority of Americans — 52% —  say they will spend the same on gifts this year as in 2009,  34%, say they will spend less, compared with 12% saying they will spend more. That 22-percentage-point gap is nearly double the average 13-point difference between these figures over the past 20 years — providing a note of caution to holiday spending forecasts.

Results for this Gallup poll are based on telephone interviews conducted Nov 4-7, 2010, with a random sample of 1,025 adults, aged 18 and older, living in the continental U.S., selected using random-digit-dial sampling. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.

Douglas A. McIntyre