It could be worse, of course.
On Monday October 5 the National Retail Federation projected that retail sales in the United States will fall 1% in the crucial November-December holiday shopping window. That will take total retail sales back to where they were in 2005.
According to the federation, whose membership represents 1.6 million retail locations, sales this season will fall to $437 billion from $441 billion in 2008 holiday shopping season. That’s a blast from the past: holiday sales were $433 billion in 2005.
You don’t have to search very hard to understand the reasons behind the drop.
There are 3 to 4 million more people out of work this year than at the same time in 2008. And those people who have jobs are paying down debt and planning to spend less this year.
Target (TGT) projects that customers with Target credit cards will have paid down $1 billion in debt on their cards by the end of the year. That would be roughly a 10% reduction from 2008’s debt levels.
85% of U.S. shoppers told Nielsen that they would spend the same or less than last year.Â
Those reasons also give you a rough estimate for when this could turn around.
I expect unemployment to peak in the first half of 2010. That would reduce the fear that has led many consumers to cut back on spending. Certainly, deleveraging of personal balance sheets wouldn’t be over by then: consumers would still have lots and lots of debt to pay down. But the process would be further along and the pace of the deleveraging is likely to have slowed.
It’s not too much to hope for a Christmas in the black for retailers in 2010.
Keep your fingers crossed. And God bless us, everyone.
Agree with the down sales. Too many people out of work and way too many people do not fall into the states that the Federal government extended unemployment benefits to. I am watching those states closely to see if the lose of revenue will cripple the stable unemployment or not in them. I predict some states doing just fine without the benefits but others it will affect deeply.
Student,
I personally don’t see it going to those levels (though I am not Jubak either). I do believe we have a drop coming though. One of the reasons I see the market continue to be “over bought” is people are continuing to put money into 401k. Some are trying to recover big loses. Others, like me, are trying to get in while the market over all is fairly low. This is why the market is over bought. Mutual Fund companies get this money and have no choice but to invest it in a way that they stated in the contract (mid to high etc.) Day traders and personal investors will not have a problem with this influx of cash because they can react faster and pull out. We are in for another drop and our 401k will be the losers.
Hi Jim,
You’ve kept pretty much neutral and played the rebound very carefully. Do you still believe there’s a chance we will slide back down to depression levels, or are the economic indicators/models telling us that we are probably going to escape another depression?
In late September, during a kingsworld interview Mr. Gerald Celente of the Trends Research Institute didn’t paint a pretty picture of the near future. During a very recent cnbc interview, John Lekas from Leader Capital predicted 6300 by year end and possibly 4200 by 2011. Using demographics to predict future spending cycles, HS Dent has been right on the money how this down turn would play out. As of mid-September he’s still saying we are down for the count with similar numbers as Mr. Lekas.
Even great secular growth companies can take a massive hit if the global economy takes another dive. When putting together your personal investment plan, do you consider these types of predictions as actually having some credibility?