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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

November 26, 2010 at 9:50 AM

Handicapping the holiday shopping season

Most economy watchers won’t really know how holiday retail sales have performed until next month. Unless you’re in the real-time, proprietary war rooms of Macy’s, Nordstrom, Costco or Wal-Mart, the variables confronting the observer are just too many. For example, what does the anecdote of a huge crowd of shoppers mean? Are they buying or just looking? And are retailers commanding strong profit margins? Or are they clearing shelves on deep discount?

Nevertheless, this is the season that is critical to the retail industry. For many small independents, it may be the last gasp. So let’s set the table. It’s three years since the economy collapsed, so a chance exists for pent-up demand. Those who are employed may feel more confident about spending. If they’ve deleveraged their credit cards, and many have, so much the better. Inflation is next to nothing, so good deals abound. Fears of a double-dip have abated.

Some of the Fed’s QE2 money may actually make it to Americans, rather than being gambled as hot money in world markets by the big playerz. If so, this could be a decisive plus for the retail season. Most high-income shoppers are doing quite well anyway. And all Americans probably have cabin fever after so many bad years — shopping, being “consumers,” has become part of the national character. And unlike the Great Depression, credit remains abundant for millions.

Now, the headwinds. Real unemployment remains at levels not seen in decades and millions of others are fearful of losing their jobs. Average American shoppers aren’t Wall Street investment bankers expecting record bonuses. They have yet to benefit from the record set in profits by American corporations in the third quarter ($1.659 trillion). Companies are barely hiring, if at all.

Consumer debt remains a problem, from credit cards to, especially, mortgages. In the 2000s, most Americans saw their wages barely budge; their real wealth was in the rising value of their houses. Now that’s gone and in many places house prices keep falling. So even those who aren’t facing foreclosure or struggling underwater have seen their net worth take a big hit. Similarly, the casino ups and downs of Wall Street don’t fill most Americans with confidence about the safety of their retirement nest eggs.

In the Black Swan Watch: European debt (thanks to bad banks) and North Korea.

The American economy may have stabilized, but at a very low level of growth. Yet many winners remain, as do those still standing after the worst hard times since the 1930s. These are the best hope for American retailers.

Today’s Econ Haiku:

Want a great city?

Don’t forget local retail

It’s Seattle’s gift

Comments | More in Consumer spending


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