Will Santa's Sleigh be Light This Year? (December, 2009)

The stock market opened 2009 very poorly, but the economy has been showing signs of life over the past months. As you can imagine, the retail industry has been holding its breath this Holiday Season. Consumer spending makes up about 70% of the U.S. economy, so December is a particularly informative time about the state of the economy. With only a week to go until Christmas, this year’s numbers have been mixed.

Consumer sentiment has been at record lows throughout the year. With unemployment reading over 10%, Americans have been worrying about their own homes, jobs, and the prospects of a “jobless recovery.” This uncertainty understandably causes people to spend less. When home values and retirement accounts decline, consumers also tend to cut back. A recent CNN poll found that 49% of people will be spending less than last year, and 39% will be spending the same as last year, with the remaining 12% spending more. Charities are also being hit, with 51% of respondents saying that they will be giving less this year, as well. In an effort to save, many families are focusing on spending time together and less on presents this year.

The news might not all be bad, though. The retail numbers in November were better than expected with sales growing by 1.3%. Bargain hunters are pushing sales with 42% of shoppers expecting to buy from discount stores. After holding back for several months, many shoppers are finally releasing some of their pent-up demand. It also seems that this year shoppers are procrastinating more than in the past. According to the National Retail Federation, on average, people had finished 46.7% of their holiday shopping by the second week of December, the lowest since 2004. Retailers are looking forward to a big push by these last minute shoppers this weekend, with December 19^th being the busiest shopping day of the year, traditionally.

The official results will come out at the beginning of next year, and it is too early to tell if shoppers will be keeping a tight grip on their wallets this holiday season. This new era of frugality can be good for consumers if the habits they start this year carry over into the future. One positive is that the number of shoppers buying gifts on credit cards (with money they pontentially don’t have) has gone down slightly since last year. As we all know, overextension of credit is a main contributor to the mess our economy is trying to get out of. Let’s all hope our country as a whole and consumers individually have learned lessons from the past couple of years and that our economy will continue to recover throughout 2010.