- Texas man arrested for powder-letter hoax
- Islamic State opens ‘marriage bureau’ for single jihadists
- Drone almost blocks California firefighting planes
- Tornado rips off roofs, downs trees near Boston
- GOP: Environmental rules keeping agents from accessing border
- John Kerry: Millions displaced by religious fighting in 2013
- Federal appeals court rules against Virginia’s gay marriage ban
- White House says Russia ‘losing’ war in Ukraine
- Hamas turns to North Korea for weapons deal, Iran for money
- Syrian casualties surge as jihadis consolidate
Shoppers give retailers early Christmas gift
Consumers pounce on heavy discounts
Question of the Day
The Christmas shopping season started with a bang and the consumer mood is brightening at a critical time during the month that brings a quarter of the year's retail sales in the U.S.
Major stores such as Macy's and Best Buy reported record traffic from Black Friday through Cyber Monday, with retailers spiking the punch by enticing consumers with some of their deepest and earliest Christmas discounting ever.
Consumer confidence surged out of recession territory as the holiday season dawned, aided by a steadily improving job market and declining prices at the pump, the Conference Board reported on Tuesday.
"The holiday shopping season got off to a good start," despite widespread predictions it would bring only tepid gains over last year, said Tom Porcelli, chief U.S. economist at RBC Capital Markets.
The National Retail Federation predicted sales gains of 2.8 percent over last year, but the performance at the start appears to track closer to other forecasters' predictions of healthier gains of 4.5 percent or higher.
"There seems to be a lot of optimism following a very successful Black Friday," said Mr. Porcelli. But he cautioned against "getting ahead of ourselves" since "promotions were rampant" and could have influenced consumers to buy their gifts earlier than usual.
"It could be a cruel finish to a good start if all this weekend did was pull activity forward," he said. "We're not trying to be a Grinch; we're just making sure we all keep perspective."
The biggest surge since April 2009 in the Conference Board's confidence index last month came "just in time for the holiday season" and resulted in a "well-received" Black Friday-Cyber Monday shopping spree, said Chris G. Christopher Jr., an economist at IHS Global Insight.
He added that, since retailers have had a few rough years and many begin to make profits only at Christmastime, "retailers need all the help they can get."
Holiday sales are particularly important for stores that sell sporting goods, clothing and electronics, as well as department stores, accounting for a quarter to half of their yearly sales and — often — most of their yearly profits.
This year's Black Friday rush was particularly lucrative for electronics dealers such as Best Buy, many of which lured shoppers as early as Thanksgiving Day by offering midnight sales on deeply discounted items such as flat-screen televisions, smartphones and video games.
Because of these "midnight doorbuster" events, which had shoppers camped out in lines waiting for goods in the wee hours of the morning Friday, consumer electronics retailers increased their share of Black Friday shoppers to 24.2 percent from 19.7 percent last year, according to NPD Group, a market research company.
"While holiday sales and traffic were strong, the consumer electronics industry needs that momentum to continue in order to see just as strong a finish to the holiday season," said Stephen Baker, vice president at NPD. "Consumers were driven into the stores by strong promotional deals."
As the consumer goes, so goes the economy. Because consumers drive 70 percent of economic activity in the U.S., the Christmas shopping season provides an important boost — or drag — as well to the overall economy.
It should be a "satisfactory holiday shopping season," reaching record sales of $466 billion in total, even using the retail federation's cautious forecast as a guide, said Harm Bandholz, an economist at Unicredit Markets.
But with growth in retail sales before the Christmas season this year already posting in at a solid 5.75 percent growth rate, he said, the final two months of the year could ring in unexpectedly strong sales growth closer to 4.5 percent.
ShopperTrak reported that Black Friday sales increased 6.6 percent over last year — well ahead of forecasts. The 16 percent jump in retail sales over the Thanksgiving weekend reported by the retail federation wildly exceeded the group's expectations.
Consumers "recovered in the run-up to the holiday season," Mr. Bandholz said, after a bone-rattling summer and spring when consumers were depressed by gasoline prices near $4 a gallon and the histrionic debate over budget cuts in Congress, among other developments.
Since that time, average pump prices have fallen to about $3.20 and — ironically — a widely anticipated fight over major budget cuts in Congress that many analysts feared would reprise the summer debacle and overshadow the Christmas season instead fizzled out relatively quietly last week with the failure of Congress' deficit supercommittee to agree on a budget plan.
Also supporting confidence, American consumers have been largely oblivious to the dramatic debt crisis unfolding in Europe, even though that crisis has rocked U.S. financial markets for months and helped cause the worst Thanksgiving week for the U.S. stock market since 1932.
"Consumers are not likely to be swayed by events overseas unless they materially affect employment prospects here at home," said Mark Vitner, a senior economist at Wells Fargo Securities.
Despite the brightening mood, the budget wars have the potential to break out again and rain on the Christmas shopping parade, said Mr. Bandholz.
That is because the deficit committee failed to come up with a plan to extend payroll-tax cuts and unemployment benefits that expire at the end of the year, which could lead to a huge cut of $155 billion in consumers' disposable incomes next year, he said.
Growth in inflation-adjusted incomes already has been negligible this year, forcing consumers to dip into their savings to finance their recent spending spree, he said. So the abrupt loss of income in January will severely limit consumers' ability to keep on spending, he said.
"Both private consumption expenditures and [inflation-adjusted economic output] could very well decline in the first quarter of next year" as a result, Mr. Bandholz said. "The satisfactory holiday shopping season would, therefore, be merely the calm before the storm."
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
- Energy Department eyes regional gas reserves for emergency use
- Economists see signs of another market bubble
- Crude oil will head north of the border to Canada
- S&P: Boeing to suffer if Ex-Im Bank killed
- U.S. job gains, unemployment dip push markets into record territory
Latest Blog Entries
TWT Video Picks
By Scott Pinsker
- D.C. seeks to stay judge's order allowing gun owners to carry in public
- Illegal immigrants demand representation in White House meetings
- Hillary Clinton: Forget Obama, George W. Bush made her 'proud to be an American'
- Babson College, BYU win top spots in Money magazine's college rankings
- Iraqi Christians rally at White House: 'Obama, Obama, where are you?'
- White House defends Kerry failure to broker Middle East cease-fire
- Romney would win popular vote in rematch against Obama: CNN poll
- D.C. seeks stay in order striking down ban on handguns in public
- Tennessee Gov. Haslam slams White House for secret dump of illegals in his state
- Computer glitch caused odd Saturday release of D.C. guns ruling
Obama's biggest White House 'fails'
Celebrities turned politicians
Athletes turned actors
20 gadgets that changed the world
Fighting in Iraq