Neither Sandy nor ‘cliff’ will steal Christmas from shoppers

U.S. consumers are in an upbeat mood and are preparing to spend more this holiday season than last year’s, providing a badly needed boost to the economy. But headwinds from the lingering effects of Superstorm Sandy and the year-end political storm brewing in Washington could put a damper on their shopping spree, analysts say.

With Thanksgiving sounding the starting gun for the national holiday shopping rush, consumer optimism has been building since the summer and recently crescendoed in surveys showing consumer sentiment near a five-year high. The International Council of Shopping Centers found about a quarter of consumers are planning to increase spending through the end of the year — the best showing in its holiday survey since 2004.

The bullish outlook has prompted analysts to forecast a healthy gain of 4 percent to 5 percent in sales during the all-important Christmas shopping season, when about a quarter of all retail sales are made in the U.S.

The National Retail Federation’s prediction of a 4.1 percent gain would make 2012 the best season since 2007 and result in a record $586 billion in sales. But that all depends on consumers ignoring the gathering clouds that threaten to rain on their parade.

“Surveys for the current year point to a solid holiday shopping season,” said Harm Bandholz, an economist at Unicredit Research, noting that the retail federation’s prediction of 4.1 percent gains could prove conservative, given the recent jump in consumer optimism and underlying growth of 5.5 percent in retail sales so far this year.

Enlarge Photo

Mr. Bandholz acknowledges the possibility of interruptions, but said he doesn’t think a political fiasco in Washington will end up ruining the Christmas shopping season.

“Certainly, there are two developments which could negatively impact the holiday season: Hurricane Sandy and the looming fiscal cliff,” he said. But he said he thinks consumers are steadfastly focused on the brightening outlook for jobs and the overall economy. Retailers, who are the largest employers in the U.S., in particular have been on a hiring binge as they staff up for year-end sales.

Mr. Bandholz noted that consumer sentiment was not affected much by last month’s superstorm, though it hit the most densely populated and wealthiest region in the country and had an outsized impact on industrial production, car sales and retail sales last month. Because of the storm, retail sales declined 0.3 percent in October as consumers in the Northeast stayed away from the stores. But economists expect sales to bounce back in November and December as consumers ratchet up for the holidays and make repairs after the storm.

Beyond the storm, consumer confidence and sales until recently have appeared to shake off fears of the looming confrontation between the White House and congressional Republicans that could result in $500 billion in spending cuts and expiring tax cuts scheduled to start taking effect at the end of the year. That leads Mr. Bandholz to be optimistic that the political drama will have little effect on Christmas sales.

“Let’s hope that policymakers do not ruin the party” as the nation gets closer to the holidays, he said.

Optimism at the mall

David Hargreaves, chief operating officer at Hasbro Inc., the leading toymaker, was one of many business leaders who say signs point to healthy Christmas sales.

“Certainly consumer demand has held up pretty well” in recent months, and customers seem “cautiously optimistic” about the future, he said.

The better outlook for sales has prompted retailers to start hiring early, and seasonal employment looks set to surge this year. The job-search site Indeed.com reported that retail job postings rose by 6 percent last month, the largest increase of any industry it has seen. Hiring has been especially robust at Apple Inc., The Walt Disney Co., Coach Inc., Costco Wholesale Corp., Inter Ikea Systems B.V. and Dressbarn stores, it said.

If consumers have their way, it will be a good holiday season, said Chris G. Christopher, economist at IHS Global Insight.

Story Continues →

© Copyright 2013 The Washington Times, LLC. Click here for reprint permission.