Holiday Season Forecast: Slower, Economists Say
The economy’s engines slowed in 2007, and many forecasters have predicted that sales for the 2007 holiday season will fall short of those of the 2006 holiday season.
On Nov. 6, Jack Kyser, the chief economist of the Los Angeles County Economic Development Corp., predicted that Los Angeles County would enjoy a holiday sales increase of only 3.1 percent compared with the previous year. The 2006 holiday season enjoyed a sales increase of 4.6 percent compared with the same season in 2005.
Kyser offered his prediction at an annual “Christmas Sales Forecast” at the Glendale Galleria shopping center in Glendale, Calif. He also said that there would be bright spots in the slowing economy. For one, the weak U.S. dollar is expected to draw more foreign tourists to visit and shop in California.
The forecast from accounting firm Ernst & Young LLP was not so grim.
On Nov. 7, the financial-services company released its seventh annual holiday forecast. It said that sales would increase 4.5 percent, compared with last year’s holiday increase of 4.9 percent.
Retail promotions will dominate the holiday season, e-commerce sales may increase more than 15 percent, and gift cards sales are predicted to skyrocket, according to Ernst & Young. Both Kyser and the financial-services company said that gift-card sales will increase 25 percent compared with the 2006 holiday season.
According to the Ernst & Young forecast, retailers predicted to do well during the holiday season will be luxury department stores and specialty stores catering to teens. The wealthy and teenagers are expected to be the least impacted by a slowing economy.
In particular, apparel sales could be weak. In the past few holiday seasons, consumers have spent more on consumer electronics than clothes. However, if the weather turns cool, cold-weather clothes might become a priority purchase for holiday shoppers, according to Ernst & Young.
The Washington, D.C.–based National Retail Federation also released a holiday sales forecast. On Sept. 20, the trade association predicted that holiday sales would increase 4 percent over last year. The NRF’s chief economist, Rosalind Wells, said that the 2007 holiday season might be the slowest one since 2002.
Despite some of the tepid forecasts, the International Council of Shopping Centers released a survey on Nov. 7 that indicated many people were not going to curb their holiday spending. ICSC found that 72 percent of consumers plan to spend the same amount of money or more than they spent on the 2006 holiday season. However, 27 percent of those surveyed planned to spend less.
The average shopper plans to spend $1,116 on gifts, decorations and holiday entertaining. The ICSC said that one of the top choices for gifts will be apparel. Sixty-nine percent of survey respondents said that they would buy fashion for the holidays, while 42 percent said that they would buy fragrances and magazines.—Andrew Asch
