News and Tribune

November 24, 2013

Cash registers ring, are you listening?

BSU economist predicts soft sales but deals aplenty for holiday season

By JANUARY WETZEL
(Seymour) Tribune

> SOUTHERN INDIANA — Some local residents said they plan to spend less money this holiday season, a sentiment echoing economists’ predictions for a dismal end to the fourth quarter of retail sales.

Those forecasts also spell bad news for the overall economic outlook in the coming year, said Michael J. Hicks, professor of economics and director of the Center for Business and Economic Research at Ball State University in Muncie.

“Most economic forecasts are predicting a very poor year in 2014, and much of that comes from estimates that consumers make about household spending,” he said.

Hicks said a major factor coming into play this year is the uncertainty over health care costs and declines in global markets.

“There’s nothing out there that is going to cause the economy to grow at a brisker clip right now,” he said. “It’s slower this year than it has been in the past several years.”

The National Retail Federation, however, is seeing things differently, expecting sales in November and December to increase around 4 percent to $600 billion, about a tenth of a percent gain over growth in 2012.

Federation president Matthew Shay said economic variables including positive growth in the U.S. housing market and the increased consumer appetite to buy larger-ticket items give retailers reason to be “cautiously optimistic for solid holiday season gains.”

Black Friday, the day after Thanksgiving, is one of the biggest shopping days of the year and traditionally is supposed to help pull retailers out of the red and into the black.

About a quarter of all retail sales for the year occur in the month before Christmas, Hicks said. And that spills over into retail sales, hiring and manufacturing of goods in January and February, he added.

Stores lure customers with deeply discounted merchandise and special sales on Black Friday and the following Saturday and, for several major retailers now, even on Thanksgiving Day.

The Monday after Black Friday is expected to be a big online sales day and has been dubbed Cyber Monday.

Hicks said the move to be open on Thanksgiving is a trend he never thought he’d see.

“A lot of this is fueled by panic,” he said. “Retailers want to move merchandise earlier rather than later. I think a lot of them believe that early Black Friday forecasts will set the tone for the rest of the holiday season.”

Earlier in the year, predictions were more optimistic, Hicks said, leading stores to order more inventory to stock their shelves for the holidays.

“Businesses make inventory decisions in July and August, and at that time it looked pretty good,” Hicks said.

But with more inventory than buyers, stores could have a difficult time moving stock.

For those customers afraid stores may run out of items before they can get there, Hicks said not to worry.

“The good news is that most retailers have over-inventoried for the season, and the holiday deals should persist well past Christmas in to the new year,” he said. “Consumers will see some of the best deals in years.”

He doesn’t think it will be enough, though, to make up for declining sales.

“I believe it’s going to be the worst holiday shopping season since 2008 or 2009,” he said.

Kendra Zumhingst of Seymour doesn’t buy into economists’ theories and said a lot of holiday spending is needless.

“I do not believe for one second the economy is bad,” she said. “If you go to the Greenwood Park Mall any weekend in the past year, the parking lot is absolutely bustling. I think it’s a complete farce to say that people are not spending.”

The bigger problem is that people spend money they don’t have, she said.

“I think people spend way too much money for things they do not need and cannot afford to buy,” she said.

Instead of shopping, Zumhingst said she wants her children to have a better understanding of the meaning of Christmas.

“I want my kids to know what Christmas is about, not how many gifts they get,” she said.

Jennifer Wayman of Seymour agreed and said that, instead of spending money on themselves, her family chooses to spend money on those less fortunate.

“One side of my family has given up presents,” she said. “We have too much stuff as it is. The money we each would have spent on a gift is supposed to go toward a charity, then on Christmas Day we share stories of what that money did and why we chose that charity.”

Wayman said the tradition has become one the whole family enjoys.

“It makes the day so much nicer,” she said. “No clutter, no mess, just quality time with family that we don’t get to see often enough.”