WASHINGTON (AP) — U.S. shoppers spent cautiously this holiday season, a disappointment for retailers who slashed prices to lure people into stores and now must hope for a post-Christmas burst of spending.
Sales of electronics,
clothing, jewelry and home goods in the two months before Christmas
increased 0.7 percent compared with last year, according to the
MasterCard Advisors SpendingPulse report.
That was below the
healthy 3 to 4 percent growth that analysts had expected — and it was
the worst year-over-year performance since 2008, when spending shrank
sharply during the Great Recession. In 2011, retail sales climbed 4 to 5
percent during November and December, according to ShopperTrak.
This
year’s shopping season was marred by bad weather and rising uncertainty
about the economy in the face of possible tax hikes and spending cuts
early next year. Some analysts say the massacre of schoolchildren in
Newtown, Conn., earlier this month may also have chipped away at
shoppers’ enthusiasm.
Retailers still have time to make up lost
ground. The final week of December accounts for about 15 percent of the
month’s sales, said Michael McNamara, vice president for research and
analysis at MasterCard Advisors SpendingPulse.
Still, this
season’s weak sales could have repercussions for 2013, McNamara said.
Retailers will make fewer orders to restock their shelves, and discounts
will hurt their profitability. Wholesalers will buy fewer goods and
orders to factories will likely drop in the coming months.
Steep discounts weren’t enough to get people into stores, said Marshal Cohen, chief analyst at the market research firm NPD Inc.
“A
lot of the Christmas spirit was left behind way back in Black Friday
weekend,” Cohen said, referring to the traditional retail rush the day
after Thanksgiving. “We had one reason after another for consumers to
say, ‘I’m going to stick to my list and not go beyond it.'”
Holiday
sales are a crucial indicator of the economy’s strength. November and
December account for up to 40 percent of annual sales for many
retailers. If those sales don’t materialize, stores are forced to offer
steeper discounts. That’s a boon for shoppers, but it cuts into stores’
profits.
Spending by consumers accounts for 70 percent of overall
economic activity, so the eight-week period encompassed by the
SpendingPulse data is seen as a critical time not just for retailers but
for manufacturers, wholesalers and companies at every other point along
the supply chain.
The SpendingPulse data released Tuesday, which
captures sales from Oct. 28 through Dec. 24 across all payment methods,
is the first major snapshot of holiday retail sales. A clearer picture
will emerge next week as retailers like Macy’s and Target report revenue
from stores open for at least a year. That sales measure is widely
watched in the retail industry because it excludes revenue from stores
that recently opened or closed, which can be volatile.
In the
run-up to Christmas, analysts blamed bad weather for putting a damper on
shopping. In late October, Superstorm Sandy battered the Northeast and
mid-Atlantic states, which account for 24 percent of U.S. retail sales.
Shopping
picked up in the second half of November, but then the threat of the
country falling off a “fiscal cliff” gained strength, throwing consumers
off track once again.
Lawmakers have yet to reach a deal that
would prevent tax increases and government spending cuts set to take
effect at the beginning of 2013. If the cuts and tax hikes kick in and
stay in place for months, the Congressional Budget Office says the
nation could fall back into recession.
Shopping over the past two
months was weakest in areas affected by Sandy and a more recent winter
storm in the Midwest. Sales declined by 3.9 percent in the mid-Atlantic
and 1.4 percent in the Northeast compared with last year. They rose 0.9
percent in the north central part of the country.
The West and
South posted gains of between 2 percent and 3 percent, still weaker than
the 3 percent to 4 percent increases expected by many retail analysts.
Online
sales, typically a bright spot, grew only 8.4 percent from Oct. 28
through Saturday, according to SpendingPulse. That’s a dramatic slowdown
from the online sales growth of 15 to 17 percent seen in the prior
18-month period, according to the data service.
Online sales did
enjoy a modest boost after the recent snowstorm that hit the Midwest,
McNamara said. Online sales make up about 10 percent of total holiday
business.
