- The Washington Times - Wednesday, September 18, 2002

Retailers can expect a 4 percent boost in sales this holiday season as shoppers remain cautious with their spending, according to the National Retail Federation.

Shoppers are expected to spend carefully during November and December owing to concerns over the sluggish economy, job uncertainty and persistent threats of terrorism.

"Consumers are very cautious, but they are still spending money," said Tracy Mullin, president and chief executive of the NRF, the largest retail trade association in the nation.

The country's slow economic recovery is the main reason for spending caution this season, said NRF chief economist Rosalind Wells.

"Employment is growing, but slowly, and incomes are restrained by soft labor markets," she said. "Consumer and business confidence have wavered due to corporate-governance concerns, the stock market has declined, threats of terrorism persist and the chance of war with Iraq looms."

However, there are signs of recovery, particularly in the housing market, with more people buying or fixing up homes, and surging mortgage refinancings, which are giving consumers more money to spend.

During November and December last year, sales increased a surprising 5.6 percent as consumers bought more gifts than expected especially those centering on the home. The NRF had adjusted its original estimates of a 5 percent to 6 percent increase to a 2.5 percent to 3 percent increase after the September 11 terrorist attacks.

"Last year, there was a tremendous amount of pessimism," Ms. Mullin said. "But consumers surprised everyone."

With the exception of last year, the NRF's forecasts are usually in line with actual sales increases straying above or below the final result by one- or two-tenths of a percentage point, Ms. Mullin said.

She says home goods and other smaller gifts in electronics will be in demand this time around, as well. Apparel a category that hasn't seen positive results in recent holiday seasons is likely to do well because of pent-up demand.

"People just can't resist buying holiday gifts," said Deborah Y. Cohn, an assistant professor of marketing at Yeshiva University's Sy Syms School of Business. "This year gifts will be more sentimental in nature because people have this residual need to show how much they love each other."

As always, this year, too, last-minute shoppers will cause retailers some anxiety. Shoppers who waited until the final weeks of the holiday shopping period in 2001 upset analysts' predictions last year.

"Retailers are going to try to get customers to spend money earlier," Ms. Mullin said. "All smart retailers will be discounters."

According to the NRF's new monthly consumer-mood survey, conducted by BIGresearch, the majority of consumers polled plan to spend the same amount on holiday gifts as they did last year.

Those planning to spend less this year said they are setting aside money for other reasons, such as adding to savings or paying off debt.

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