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Last Hope For Holiday Shopping Frenzy: The Few Who Can Splurge

testosteronepit's picture




 

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter

Consumer spending, the foundation of the US economy, has not exactly been growing at gangbuster rates. With one big exception: auto sales. Accounting for about 20% of total retail sales, they’ve been phenomenal, booking double-digit growth rates, and the industry has been wallowing in its own exuberance. But in September, there was a downdraft. The calendar got blamed. And in October, there was the 16-day government shutdown and the debt-ceiling debacle. It hit auto sales hard.

Some manufacturers started muttering unprintable things under their breath. Hyundai CEO John Krafcik worried out loud that the debacle could chop off 10% from October sales. A Kelly Blue Book survey painted an even grimmer picture: 18% of potential buyers said they’d outwait the conniptions in Washington before buying a car or truck. Now that the debt-ceiling can has been kicked down the road into next year, there are rumors that auto sales have picked up again. Halleluiah. Even if true, October’s quarter panel may have gotten dented.

Our favorite hope mongers got slammed on Friday by the Reuter’s/University of Michigan consumer sentiment index. It continued its ugly cascade into purgatory. At the end of August, it was 82.1; consumers were feeling OKish. Then it came unglued: 77.5 at the end of September, 75.2 in mid-October, and 73.2 today, the lowest reading since December 2012, when consumers had been contemplating the dreadful but now forgotten fiscal cliff.

Much of the dive is based on the economic outlook index, which plunged from 73.7 in August to 67.8 in September, to 63.9 in mid-October to 62.5 today. The “solution” in Washington has done nothing to assuage consumers. Plus, the dive had started before the Washington conniptions became acute and may be seated more deeply.

But industry soothsayers had been spewing retail optimism for weeks. Consumers intend to goose their spending by a breath-taking 11% to $646, found management consulting firm Accenture in its pre-holiday shopping intention survey conducted in September and released October 7. OK, so Accenture counts big retailers among its clients, and it might have had an agenda.

But even in its soothing ointment there was a fly: the disparity between the few who benefited from the Fed’s policies and the many who got clobbered by them. Of the respondents, 18% would spend less than last year, and 62% would spend the same. That’s 80%! The remaining 20% would increase their spending, by a lot! 16% by up to $499; and 4%, the real beneficiaries of the Fed’s policies, by over $500. The determination of shopping on Black Friday is the “highest in five years,” the report said. And gift cards, the greatest ripoff of all times, are still number one on consumers’ shopping lists.

Ah yes, the inexplicable American consumer, the strongest creature out there that no one has been able to subdue yet! According to Accenture, this will be a hopping holiday season for retailers.

So Deloitte, another mega consulting, tax, and audit firm, weighed in with the results of its survey, conducted in mid-September before the shutdown debacle, but released on October 21. According to it, these inexplicable American consumers would boost their holiday spending by 9.1%.  

They weren’t alone, way out there on that limb. On October 3, the National Retail Federation forecast that holiday sales would increase 3.9% to $602.1 billion, based on government and industry data. While that doesn’t look huge, given that we have about 2% inflation, it’s higher than the 10-year average growth of 3.3%.

“A realistic look at where we are right now in this economy,” is what NRF CEO Matthew Shay called it. A mix of “continued uncertainty in Washington and an economy that has been teetering on incremental growth for years,” he said. “Retailers are optimistic for the 2013 holiday season.” Even more optimistic was the NRF’s digital division, Shop.org, which forecast that online holiday sales would jump by 13% to 15%!

But on October 16, a shopping-season fiasco occurred at the NRF. Its holiday consumer spending survey found that the average shopper would spend $737.95, 2% less than last year, in contrast to the 3.9% increase it had forecast two weeks earlier. And to fit more gifts into their squeezed budgets, consumers would slash “self-gifting” by 8% to $129.62, the lowest in years.

“Americans are questioning the stability of our economy, our government, and their own finances,” a humbled Shay said this time. He expected consumers “to set a modest budget ... as they wait and see what will become of the US economy in the coming months.”

In the same survey, 51% said that the overall state of the economy, and Washington’s meddling in it, would impact their spending plans “a little” or “a lot” during shopping season. And 79.5% said they’d cut corners, whittle down their shopping budgets, and spend less.

That was before the government’s presumed out-of-money date, October 17. With the doomsday can now safely kicked into early next year, shouldn’t everything be hunky-dory? Um, only a week later, on October 25, a new NRF poll found that the number of consumers who said their spending plans would be impacted by the economy jumped from 51% to 57%.

Alison Paul, head of Deloitte’s retail group in Chicago – remember Deloitte’s hype-infused survey above, predicting a veritable shopping frenzy with 9.1% growth? – retorted to Bloomberg and its incredulous readers that the shutdown might have impacted consumer sentiment, but not enough to throw off the economy during shopping season.

Then Gallup put the best spin on a crummy situation. Holiday spending intentions were up 2% to $786, the highest since 2007, it said on October 21, based on a poll conducted during the early stages of the shutdown. That 2% “growth” would be about the rate of inflation. So stagnation. This is how they twisted it, without a scintilla of evidence: “Now that the shutdown is over, consumers’ Christmas spending intentions could change, and perhaps” – emphasis mine – “swell further, resulting in an even more robust holiday retail season than the October data indicate.” A leap of faith. Gallup was practically giddy in its extrapolation, but has since gotten slammed by Friday’s plunge in the Reuter’s/University of Michigan consumer sentiment index.

Hope mongers are trying salvage the situation. And maybe they’re trying to come to grips with what consumers are actually going to do in this quagmire of an economy where only a few benefit while the vast majority struggle to make ends meet, which is about the only thing that even the most gloriously optimistic survey confirmed: any growth will have to come from the few who can splurge. The rest of the consumers are simply too strung out; and now they're getting even more skittish, and they’re retrenching.

Selling airline tickets to our increasingly pauperized consumers is an art. Hiding price increases is an even greater art. While there are people who don’t worry about the price as they luxuriate in first class, others aren’t so lucky. For them, the industry has a special treat: squeezing their hips. Read...  The Indelicacies of Hiding Inflation.

 

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Sun, 10/27/2013 - 00:12 | 4094460 QEsucks
QEsucks's picture

@Wyatt Junker

Green +1000

Sat, 10/26/2013 - 19:43 | 4094081 lakecity55
lakecity55's picture

Nobody in our family is spending anything for Xmas.

No extra money.

In fact, I do not think Xmas sales will do well at all.

In fact, I was thinking of setting up a fake SA moneypot at Wallyworld to get cash.

Sat, 10/26/2013 - 20:56 | 4094172 NOZZLE
NOZZLE's picture

Good luck wit dat, one of my latest Bankruptcy clients is a commission saleswoman at Needless Markup Chitcago for 20 years talking to me because she is having one of her worst years ever.

Sat, 10/26/2013 - 19:13 | 4094046 Diogenes
Diogenes's picture

What's wrong with spending money you don't have to buy things you don't need to impress people you don't like?

Sun, 10/27/2013 - 03:51 | 4094627 geekgrrl
geekgrrl's picture

Not participating in that system would be like the spice not flowing. It's inconceivable to the TPTB. It would undo everything.

Sun, 10/27/2013 - 00:17 | 4094043 Diogenes
Diogenes's picture

They've got the urge to splurge but no dough to blow.

Sat, 10/26/2013 - 18:53 | 4094022 Make_Mine_A_Double
Make_Mine_A_Double's picture

And herein this article lies the key to why big business, Donk/Repub axis, unions are all on board for unrestricted illegal immigration - even though the country is bankrupt and there is no need at all for bottom rung labor.

There is however a need for new consumers to buy crap - social cost be damned.

Sat, 10/26/2013 - 17:57 | 4093949 Wyatt Junker
Wyatt Junker's picture

What?  No more Tickle Me Elmos for little johnny?

Aww.

I'm gonna miss those Doorbusters at Wally Wuhrld, 500 obese lardies ramming through the eye of the needle like the running of the bulls, getting stomped on and watching a beat down on aisle 7 as two homies grab the last iwhogivesafuck in a death dance.  Then watching a boozed up black santa get tasered for pretending to pandhandle for Salvation Army.

Sat, 10/26/2013 - 17:29 | 4093904 joego1
joego1's picture

I'm saving all my extra money for my governernment mandated Obamacare fleecing.

Sat, 10/26/2013 - 20:16 | 4094120 SAT 800
SAT 800's picture

Buying more silver for my grandchildren; it will remain in a very quiet basement, slightly dusty, in a very conservative European Countrty for the time being. They will get Christmas Cards; they understand what the silver is for.

Sat, 10/26/2013 - 17:14 | 4093879 Make_Mine_A_Double
Make_Mine_A_Double's picture

Let me just say that no one I know whom are mostly affluent and good earners.....even considered for a moment the 'government shut down' in their spending habits or plans. Maybe it did for government trolls, but to anyone not wallowing in the gubermint bog this is a complete canard.

I suspect the primary drivers are digital and product minaturization are the larger culprits. You can cram an awful lot of shit onto a Iphone and Galaxy nowadays. I think that is what is cannabalizing 'black box' sales which have been the drivers in the Xmas seasons past.

The other dead hand is BozoKare and folks should be realizing right about now that their presumed 'disposal income' has already been disposed of.

 

 

Sat, 10/26/2013 - 16:55 | 4093856 JamesBond
JamesBond's picture

What you don't spend on the economy will simply be added to welfare programs to fill the GDP mirage gap...

 

 

jb

Sat, 10/26/2013 - 16:45 | 4093834 Bloodstock
Bloodstock's picture

Been in retail for 50+ years. I am far from an expert but anyone who thinks they can predict the public better think again. At times, there is no rhyme or reason. None. Nada. Human beings are a forever interesting bunch. Somewhat predictable, yet somewhat unknown. ANY thing can happen on any day. Best thing to remember is that even some of the dumbest folks aen't stupid. Don't let 'em fool ya, the truth wil prevail and (they) hate that. Keep the faith brothers. Fuck 'em!

Sat, 10/26/2013 - 16:04 | 4093767 cbxer55
cbxer55's picture

Don't fly any more, never will again. Did not purchase anything for anyone for X-mas last year. Repeating that again. Also told everyone in the family not to buy anything for me, I will not accept it. Have no vehicle payments as I own all three of my vehicles outright. Do not anticipate any new vehicles for a LONG LONG time. Have no credit cards, never will again. No cash, no buy.

Just doing my small part. ;-)

Sat, 10/26/2013 - 22:30 | 4094317 Miffed Microbio...
Miffed Microbiologist's picture

We're doing the same this year as well cb and we're considered " middle class". A few practical gifts for our two daughters that we have already purchased when they had gone on sale. We have decided to buy our living Christmas tree our friend raises on his little farm like we do every year. Then our small family gets together and we trim the tree with all the kids dilapidated ornaments they made in grade school listening to Christmas carols. We will eat the turkey I raised and help butcher and all will participate in prepping the meal as we do each year. We will laugh, tell old family stories and have some good wine we helped harvest. And that's about it. Sorry corporate America, go fuck yourself.

Miffed;-)

Sat, 10/26/2013 - 18:53 | 4094024 Tijuana Donkey Show
Tijuana Donkey Show's picture

Terrorism! You need to buy, buy, buy comrade. 

Sat, 10/26/2013 - 19:27 | 4094061 cbxer55
cbxer55's picture

I do. Booze and good cigars. ;-)

Sat, 10/26/2013 - 16:03 | 4093766 odatruf
odatruf's picture

Last year, my xmas spending was about $150, not counting the books I bought for children under 18. Most of the $150 was for canning / preserving supplies that I used to give preserves and other things put up from my garden. This year's costs will be much lower as many of the people who got canned goods last year returned the empty jars to me in hopes for a refill. 

 
That's down from about $1,000 in prior years covering roughly the same number of people. Happiness and satisfaction way up; feeding the beast and spending way down.

Sat, 10/26/2013 - 21:06 | 4094184 duo
duo's picture

the $350 I usually spend will pay for half a month of the new Silver Obamacare plan.  Each of my nieces and nephews will get a picture of Obama Claus.  A Christmas they will surely remember.

Sat, 10/26/2013 - 17:24 | 4093899 WillyGroper
WillyGroper's picture

Wonderful way to celebrate. More people are waking up to the labor involved in that plus the absolute quality. Good on ya.

Sat, 10/26/2013 - 16:29 | 4093809 Kassandra
Kassandra's picture

We did the same. Because it's the only way forward.

Sat, 10/26/2013 - 15:29 | 4093690 WillyGroper
WillyGroper's picture

I'm doing my part to end this monstrosity. My Xmas budget is $0.00

Corporate can byte me.

Speaking of corporate. Disregard where he's published it, but get a load of what Nader is saying about MSFT. Your bloody heart rate.

Just plain sick I tell ya.

Sun, 10/27/2013 - 10:32 | 4094997 franciscopendergrass
franciscopendergrass's picture

Great Article

 

Sat, 10/26/2013 - 16:40 | 4093827 lynnybee
lynnybee's picture

"  I'm doing my part to end this monstrosity. My Xmas budget is $0.00 "  ... proud of you, Mr. Groper !   my budget is approx. $300 & i'm saving $100 for dire times & the other $200 will be spent on beans & bags of rice & cooking oil; NOT purchased at Walmart, either.  

Sat, 10/26/2013 - 17:21 | 4093894 WillyGroper
WillyGroper's picture

Kinda sounds like Scrooge, but I am giving. Just not Chinese plastic crap, to be thrown away or dumped in a drawer, it's just going to be of my own making. Luxurious homemade goat milk & shea butter soaps & lotions. Pthalate & paraben free with the supplies I have on hand. 

Thank heavens everyone I know uses soap. ;)

Sun, 10/27/2013 - 01:37 | 4094551 geekgrrl
geekgrrl's picture

Right on!

I've been making soap for years. Everyone raves about it, and it's a low-temperature (80 degrees F) mix of oils and NaOH-H2O. Very easy to make and far superior to store-bought milled soap.

All I need now is a local liposuction clinic ...

Sun, 10/27/2013 - 03:08 | 4094606 geekgrrl
geekgrrl's picture

Since you're into making soap, this book has a number of good recipes you might find worthwhile. FYI.

Mon, 10/28/2013 - 12:14 | 4097876 WillyGroper
WillyGroper's picture

Thanks. I have that one & many others that I scoured before diving in. Here's one of my favs.

Many women like the almond oil.

Many men prefer the hazelnut oil. 

All like the Shea butter. 

Mon, 10/28/2013 - 21:30 | 4099834 geekgrrl
geekgrrl's picture

Many thanks! I'm going to have to get that book. 

Yes, my soaps are usually loaded with sweet almond oil, but it's nice to know the guys like hazelnut oil. I'm about to make a few batches and I think I'll try that, and maybe a batch with Shea butter, but my recollection is that this is one of the most expensive oils.

I'm curious what kind of molds you use? I made a few hinged boxes where the sides fold down, similar to these, but I used full piano hinges. I line them with parchment paper, but it's a bit tedious to do this and I'm looking for a less labor-intensive mold.

Tue, 10/29/2013 - 11:28 | 4101413 WillyGroper
WillyGroper's picture

So as not to boor folks, I sent you a contact req.

Tue, 10/29/2013 - 19:11 | 4103092 geekgrrl
geekgrrl's picture

Yes. Thanks. I responded, although I don't completely understand how the contacts work.

Wed, 10/30/2013 - 11:41 | 4104884 WillyGroper
WillyGroper's picture


To use Chat, and User Relationships, you'll have to be registered. On the right sidebar, navigate to 'My Account', then 'Edit', and finally tick the box that says "Enable Chat".  From here, after a second or two, you'll see a nifty bar pop up on the bottom of your screen, and an ominous "0" next to users online. Fret not, this is where User Relationships comes into action. 

Sun, 10/27/2013 - 03:06 | 4094603 Deo vindice
Deo vindice's picture

.

Sun, 10/27/2013 - 18:19 | 4095977 geekgrrl
geekgrrl's picture

Although I didn't see what you originally posted, I can imagine. Just FYI, I am 105lbs, so I am not in need of liposuction. It was a Fight Club reference, which I assume you soon realized and erased your (probably fat-hating) response.

I could be wrong, but I doubt it.

Sat, 10/26/2013 - 15:17 | 4093684 q99x2
q99x2's picture

There are a lot of ways to use FRAUD to boost GDP.The FEDs don't need consumers.

Sun, 10/27/2013 - 04:46 | 4094658 Offthebeach
Offthebeach's picture

If I build a strapping and blue tarp igloo in the woods by the highway..that would be +GDP, right?

Sat, 10/26/2013 - 17:39 | 4093912 economics9698
economics9698's picture
"Last Hope For Holiday Shopping Frenzy: The Few Who Can Splurge"

 

Government workers, Wall Street, and bankers. 

Sat, 10/26/2013 - 23:08 | 4094383 philipat
philipat's picture

1. Form fascist alliance between Corporations and Governments worldwide.

2.Use Globalisation as a pretext to reduce production costs by shipping all high-paying jobs overseas, other than in the financial sector and Government, which produce nothing anyway.

3. Corporate margins skyrocket as costs fall and consumers buy lower-priced stuff. This benefits the EM's.

4. Margins peak and, because there are no more jobs, there is no more consumer. Sales fall and EM's suffer also because there is no consumer to manufacture for and ship to.

5. The world economy stagnates and does not respond to QE because QE does not address the fundamental issues.

6. Return to Item 1.

Sun, 10/27/2013 - 01:55 | 4094561 Deo vindice
Deo vindice's picture

@ economics9698

"Government workers, Wall Street, and bankers. "

That group would hardly be considered the "few" who can splurge.

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