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.
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.