- The Washington Times - Wednesday, November 15, 2000

Retailers can expect another jolly holiday season despite some uncertainty in consumer spending last month, say economists.

Retail sales, not including declining automobile sales, rose 0.4 percent in October, a slowdown from a 0.7 percent increase in September, the Commerce Department reported yesterday.

"I think it's going to be a good year," said Irwin Cohen, global managing director of the Consumer Business Practice at Deloitte & Touche. "Given the volatility of gas prices, the stock market and interest rates, consumers have continued to spend."

And they aren't likely to stop now.

The low unemployment rate and the security of those jobs, as well as income growth are the driving forces behind consumer spending, Mr. Cohen said.

A holiday retail outlook, conducted by Deloitte & Touche and the National Retail Federation, expects a 5.5 percent to 6.5 percent increase in November and December sales from the same period last year. Retail spending is expected to reach $196 billion to $198 billion for the 2000 holiday season.

That kind of increase is above the 5.3 percent average increase in holiday spending over the past 10 years, said Sarah Scheuer, a spokeswoman for the National Retail Federation. However, this season is not expected to be as high as the 8 percent increase between the 1998 holiday season and the 1999 season.

"It's not going to be a blockbuster [season], but it'll be an above average holiday season," Ms. Scheuer said.

Rosalind Wells, National Retail Federation's chief economist, said in a statement that the Commerce report shows the economy is still healthy but shows signs of moderation.

"The economy and retail sales are following an expected path of moderate but sustainable growth," she said.

"People inevitably buy during the holidays, but they may slow down spending prior to that," Ms. Scheuer said.

The weakening consumer demand in October has been blamed on a variety of factors, from changes in the stock market and higher interest rates to rising fuel prices.

"There's enough uncertainty and softness that I think people will pull back a little on their spending," Mr. Cohen said.

In October, overall sales by the nation's retailers, which were $255.3 billion, edged up just 0.1 percent, but that included a 1 percent dip in automobile sales, according to the Commerce Department's report.

The small October gain followed a big 0.9 percent increase in September and was the weakest showing since August, when sales were flat. Auto sales were the lowest since April.

But October's retail sales do not indicate a bad season for retailers despite the drop in automobile sales a category not considered a part of holiday sales.

According to the NRF/Deloitte & Touche survey, about 82 percent of consumers say they will spend more or the same as last year about $836 on holiday gifts.

Despite low unemployment and income growth, some people are concerned about high gasoline prices, according to the survey. About 27 percent of those asked said the higher gas prices would likely reduce their holiday spending.

On the other hand, the slumping stock market and higher interest rates are not likely to curb consumers' spending within the next couple of weeks. Fewer than one in 10 consumers said the stock market's volatility would slow their spending on gifts and only 17 percent felt higher interest rates would decrease their spending.

Other retail reports, surveys and forecasts are all pointing to a better-than-ever holiday season for on-line retailers. Between November and December on-line sales are expected to reach $11.6 billion up from $7 billion last year, according to Jupiter Communications.

The Boston Consulting Group and Harris Interactive expect 96 percent of last year's on-line shoppers will head to the Internet again this year to purchase gifts and they will spend $240 $70 more than last year.

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