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Holiday Spending Forecasts Differ

17 Oct, 2003 By: Holly J. Wagner

Holiday spending will be great or dismal this year, depending on whom you believe.

Some early predictions have been quite optimistic, but already the season is shaping up as a battle of the analysts.

“Retail sales gains for the 2003 holiday season will be far better than the meager increases retailers experienced a year ago,” said National Retail Federation (NRF) chief economist Rosalind Wills in a Sept. 16 report.

Deloitte & Touche chief economist Carl Steidtmann followed Sept. 25, with a report that consumer liquidity from this year's tax cuts and refinancings would spur an increase of 6.5 percent to 7 percent in holiday spending.

“The economy stands poised to deliver one of the best holiday seasons in the past 10 years and, most certainly, the best holiday season of the new millennium,” he said.

But since then, the Federal Reserve has reported that consumer debt rose by $8.2 billion in August -- well above the $6 billion analysts expected. And consumer confidence in September sunk to its lowest level since U.S. troops stormed into Iraq in March, according to research group The Conference Board.

Those reports have prompted other analysts to release more conservative forecasts.

“Both consumer confidence and consumer sentiment are slipping,” said Richard Hastings, chief retail analyst with Bernard Sands. “The NRF came out with their forecast too early, when these indicators were showing improvement.”

“The economy and retail sales are on the rebound, but the signs suggest that it will be an uneven rebound,” said Frank Badillo, senior economist for Retail Forward. “Until consumers benefit from a pick-up in the job market, sustaining the rebound depends on a lot of one-time economic drivers, such as the surge in mortgage refinancing and tax breaks. Those one-time drivers should lose steam before a job rebound fully kicks in. The holiday season is far from a slam dunk for retailers.”

More narrowly tailored projections bode well for home entertainment.The Consumer Electronics Association (CEA) reported nearly three-quarters of all U.S. households say they are likely to purchase at least one piece of hardware as a gift this holiday season, with 71 percent of consumers expecting to visit electronics retailers. Among the items in greatest demand are DVD players (31 percent) and game consoles (20 percent).

Forrester Research analyst Carrie Johnson predicts a 42 percent growth in online holiday sales, from $8.4 billion last year to $12.2 billion this year.

On the game front, NPD Group predicts a boom season for video game sales because of high use of Internet-enabled games, the number of hours gamers spend engaged in gaming, low-priced console bundles and prices below $40 on half of the games available for console systems.

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