An Iowa State University economic expert believes a national survey showing an increase in retail spending this holiday season is overly optimistic. The National Retail Federation’s survey of its members found that the group expects a 2.2% increase in holiday shopping from 2007, but I.S.U. economist Joydeep Bhattacharya isn’t so optimistic.
He expects things to be in the negative numbers, with a drop in sales of 3% to 4%. Bhattacharya says the signs just don’t point to much spending this holiday. Bhattacharya says consumer spending has already been dropping the last two or three months, and the economy has gotten worse.
The economist says, “expectations are really bad, and that’s really what’s driving all of this,” as he says the expectations of the future are “very grim.” Bhattacharya people are much less willing to spend on a bunch of extra Christmas gifts without knowing where the economy is headed.
He says people are doing what’s called “precautionary saving” — that is saving money in anticipation that the tough times aren’t going to be over right away. Bhattacharya says there’s usually a spike in savings in times of uncertainty, citing September 11th of 2001 as a good example of when savings spiked.
Bhattacharya says any “upmarket” retailers that rely on discretionary spending will suffer. He says those stores own lines of credit are frozen, so they won’t have the ability to give big savings to spur sales, so stores retail stores like Sam’s Club and WalMart will likely benefit from the mood of the country this holiday season. Bhattacharya also doesn’t think there’s anything the government can do to help the holiday season.
“No, this has gone beyond that I think right now,” Bhattacharya says. He says it’s evident the first bailout has not worked, and there’s now talk of bailing out the auto industry and other companies. Bhattacharya says the only thing to do right now is to wait it out and see if the economy improves. Bhattacharya says one area that has historically been recession-proof is entertainment.
AUDIO: Radio Iowa’s Dar Danielson reports on the retail outlook. :55 MP3