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Dismal Holiday Shopping Season Holds Little Relief for the U.S. Economy

By Jennifer Yousfi
Managing Editor

The usual Christmas rush will hold little relief for retailers and a flagging U.S. economy, as the National Retail Federation (NRF) predicts a lackluster holiday shopping season.

The NRF today (Tuesday) released its estimate for the 2008 holiday shopping season. The largest global retail trade association forecast a scant 2.2% increase to $470.7 billion in end-of-year retail purchases.

Current financial pressures and a lack of confidence in the economy will force shoppers to be very conservative with their holiday spending,” said NRF Chief Economist Rosalind Wells in a statement. “We expect consumers to be frugal this season and less willing to splurge on discretionary items.”

The 2.2% prediction for the 2008 holiday shopping season is the slowest rate of growth in six years since the 1.3% rate of growth during the 2002 holiday shopping season. The rate represents a slight drop from 2007’s increase of 2.4% and half of the 4.4% ten-year average according to NRF data.

Everything is so volatile and so uncertain,” the NRF’s Wells said in an interview with Reuters prior to the forecast’s release. She added that this year’s projection for the holiday shopping season was one of the most difficult to assemble in her 13-year tenure with the retail trade group.

“I haven't experienced a time where I've seen … a crisis like this,” Wells said.

The American consumer faces a challenging market environment as the labor markets continue to weaken and real incomes decline. Inflation continues to boost the cost of household staples such as food and fuel and domestic budgets are stretched thin.

That’s bad news for a U.S. economy that counts on consumer spending to provide over two-thirds of gross domestic product (GDP). With such a huge slowdown in retail sales, it’s going to take time for the economy to get back on track.

“There are so many indicators that are in recessionary territory already that there is a possibility that we see no growth or slightly negative growth in the next quarter or two into early of next year, and then it takes time for that to turn around,” Wells told Reuters.

Discount retailers, such as Wal-Mart Stores Inc. (WMT), that make value the cornerstone of their product offerings and marketing are likely to fair best during the upcoming months, while specialty retail stores suffer.

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  1. Ashley | September 30, 2008

    With the economy getting worse each day, of course the outlook on the holiday shopping season doesn't look so good. People don't need to spend like crazy when things are as bad as they are.
    My family has decided we're not going to exchange gifts this year. Instead, we will spend time together, and maybe just bake cakes, cookies, etc. Only the little kids will get gifts. My holiday just became stress-free.
    I will however, still shop on Black Friday and throughout the holiday season! I need things, and have plenty of family members with birthdays that fall during holiday season. I won't be spending nearly as much, though.

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  1. […] hope that the holiday season would rejuvenate American consumers was dashed by the National Retail Federation, which last week forecast a scant 2.2% increase in end-of-y… – the slowest rate of growth in six […]

  2. […] figures above, coupled with the very dismal economic forecast for the holiday retail season, we could very well see depression-level unemployment rates, which will ripple through the economy […]

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