Holiday Forecasts Look for 
Stable Shopping Season

Retail sales during the winter holiday period represent an important measure of economic activity. They are of obvious significance to the trade sector, with many retailers depending on these sales for a substantial portion of their annual income. Sales tax revenue generated by these sales are also important to state and local governments. And sales at this time of year provide a very good measure of consumer sentiment.

While forecasters use slightly different methods to track sales during the holiday season, holiday sales are generally expected to be at the same level or slightly better than last year. Typical forecasts call for an increase of 3.0 to 6.0 percent from last year's spending. The National Retail Federation (NRF) is forecasting an over-the-year increase of 5.0 percent.1 The International Council of Shopping Centers (ICSC), which measures sales a little differently, is projecting an increase of 3.0 to 3.5 percent during November and December.2

Popular annual holiday mood surveys give some insight into shoppers' intentions for the season. The NRF 2005 Holiday Consumer Intentions and Actions Survey found that consumers plan to spend an average of $738.11 this season on winter holiday items including gifts, decorations, greeting cards and postage, candy and food, and flowers and potted plants. By region, consumers surveyed in the Midwest and West plan to spend less than average at $673.66 and $698.07, respectively, while those in the South and Northeast plan to spend more ($779.74 and $789.14, respectively).3

The annual Deloitte & Touche Consumer Holiday Survey found that plans for spending on charitable giving are up and gift cards will again be a popular gift item this year. The survey found that planned spending on charitable donations this holiday season was up from last year and exceeded planned purchases on holiday entertaining in the home, non-gift clothing, and holiday furnishings categories, which were all down sharply from last year. The survey results also indicated that gift cards will likely be popular again in 2005, with 67 percent of respondents saying they plan to purchase an average of 4.9 gift cards this year.4

Gift card purchases can have an affect on reported retail sales during the traditional holiday season. Companies that issue gift cards generally do not record the value as a sale until the gift card is redeemed, delaying a true picture of the season until later in the year. In fact, half of the respondents to the Deloitte & Touche survey reported having unredeemed gifts cards from last year. This supports the trend that sales during November and December are shifting in importance for the overall year. According to the ICSC, the November and December share of General Merchandise, Apparel, Furniture and Furnishing and Other (GAFO) annual sales has declined from 24.4 percent in 1992 to 22.5 percent last year.

While forecasters are predicting steady sales this season, several factors may influence holiday shopping, including energy prices, high debt and slow income growth. Although gasoline prices have tempered in the last few weeks from record highs, rising heating fuel costs are a new area of concern about energy. Projections for increases in heating costs this year range as high as 50 to 70 percent more than last year, depending on the type of energy source used and how cold the winter becomes. Household debt is high and real disposable income growth has been slow, potentially leaving some consumers with less to spend. Consumer confidence, another factor that could influence retail sales, has declined for the past several months. However, preliminary November figures do point to some improvement in consumer confidence.

This year's holiday shopping season (Thanksgiving Friday through Christmas Eve) is 30 days, the longest since 2001, which may boost the relative measurement of holiday sales. Although the day after Thanksgiving is still one of the biggest shopping days of the year, the Saturday before Christmas was the top shopping day last year. Regardless, estimates of holiday sales should begin to be available soon after Thanksgiving.

1The National Retail Federation reported holiday sales in 2004 were up 6.7 percent from 2003. 
International Council of Shopping Centers. 2005 U.S. Holiday Spending Outlook. The ICSC reported holiday sales in November and December of 2004 were up 2.3 percent from the same period in 2003. 
The NRF 2005 Holiday Consumer Intentions and Actions Survey surveyed 7,726 consumers between October 5-12, 2005. 
The Deloitte & Touche Consumer Holiday Survey polled 17,447 consumers on the Internet from October 10-18, 2005. 


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