LC Bulletin: Buying less but spending more

November 18, 2011. Retrieved online November 22, 2011 from Samantha Roberts, Las Cruces Bulletin

Many factors affect this year’s holiday spending

According to economists, this year’s holiday spending might be one of the hardest to predict because of increased transportation costs, increased food prices, an extended Black Friday and an unstable economy.

“I hope I am wrong, but my forecast for 2011 holiday retail sales is a lot worse than those of my fellow forecasters,” said Bruce Huhmann, an associate professor at New Mexico State University who specializes in marketing communications, international marketing, consumer behavior and retail marketing. “Most predictions are very positive, but I think we will see a 1 percent drop in spending.”

The International Council of Shopping Centers (ISSC) released its annual study, stating retailers will see about a 3 percent increase, said Susan Palmer, marketing manager for Mesilla Valley Mall.

Breaking that number down, Huhmann said the same study shows a 3.5 percent increase in chain store sales; a 3 percent increase in general merchandise, apparel, furniture and other non-auto or food retail sales; and a 2.2 percent increase in shopping center sales.

“There are two competing trends recognized to various degrees,” Huhmann said. “A lot of consumers are getting tired of cutting back and not spending. We have had a couple of Christmases where people felt they should be more conservative. I can see those people spending more money because they would like to have a good Christmas, maybe spend a little more on the kids.”

On the other hand, the unstable economy is still causing fear for some consumers.

“New Mexico is dependent on the government because of the military bases and much of the land is government owned. If the government issues cutbacks, people may take a step back (in spending),” Huhmann said.

As of Friday, Nov. 18, Christmas is just 37 days away and Black Friday is seven days away. With these days approaching, holiday spending may be soon enough to dodge the effectsof a potential European crisis or cutbacks from the Super Committee.

“When I made my predictions in September, it looked like something was going to happen in the following three months,” Huhmann said. “So far, we have avoided anything too negative.

“I think Europe will be able to kick the can past New Year’s and postpone. The same goes for the Super Committee; they will find a way to stall.”

In 2011, gas prices reached as high as $5 per gallon in some parts of the U.S., and southern New Mexico saw $3.90 per gallon and more at some stations.

“For every 1 cent gas prices increase, consumers lose about $4 of spending power,” Huhmann said. “Gas has come down, but was still higher in 2011 than 2010.”

High gas prices don’t just hurt the consumers. Increased transportation costs for manufacturers and retailers could cause increased retail prices this year.

“The higher transportation cost could be the 3 percent increase that economists are predicting,” Huhmann said. “After talking to people early in the fall, most people said they were planning to spend about the same or a little less, telling me there might be a 1 percent drop, which is still bad news for retailers.”

America has also seen an increase in another necessity – food.

According to Reuters.com, more than one-third of U.S. consumers expect rising food prices to cause them to cut back on holiday spending.

The all-food consumer price index (CPI) projected a 1 percent increase throughout 2011. The CPI for all food increased 0.4 percent from August to September, increased 0.5 percent from July to August and was 4.7 percent above level as of September.

These increased food costs could cause Americans to cut back spending.

The National Retail Federation predicted the average American will spend $704.18, down $14.80 from last year.

However, Palmer said it appears stores at the mall looked stocked as normal.

Huhmann said he expects stores to keep their inventory levels on the low side “just in case.”

“We expect the November numbers to be up,” said Palmer, adding that the mall will be staffed for a typical Black Friday crowd. “I think retailers are counting on any increased spending to come from Black Friday weekend performances. People are in the best price and bargain mode.”

Palmer said Sears and JC Penney are opening at 4 a.m. Friday, Nov. 25, and the mall opens at 6 a.m.

“It would be great to have a good holiday season because it is always a good prediction for the coming year’s economy,” Huhmann said.

Read the Las Cruces Bulletin article.


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