US holiday retail sales this year were the weakest since 2008, when the nation was in a deep recession. This year, the shopping season was disrupted by bad weather and consumers’ rising uncertainty about the economy.
A report that tracks spending on popular holiday goods, the MasterCard Advisors SpendingPulse, said on Tuesday that sales in the two months before Christmas increased 0.7 percent compared with last year. Many analysts had expected holiday sales to grow 3 to 4 percent.
In 2008, sales declined by between 2 percent and 4 percent as the financial crisis that crested that fall dragged the economy into recession. Last year, by contrast, retail sales in November and December rose between 4 percent and 5 percent, according to ShopperTrak, a market research firm.
A 4 percent increase is considered a healthy season.
Shoppers were buffeted this year by a string of events that made them less likely to spend: Hurricane Sandy and other bad weather, the distraction of the presidential election and grief over the massacre of schoolchildren in Newtown, Connecticut.
The numbers also show how Washington’s current budget impasse is trickling down to Main Street and unsettling consumers. If US shoppers remain reluctant to spend, US economic growth could falter next year, analysts say.
In the end, even steep last-minute discounts were not enough to get people into stores, said Marshal Cohen, chief research analyst at the market research firm NPD Inc.
“A lot of the Christmas spirit was left behind way back in Black Friday weekend,” Cohen said, referring to the traditional retail rush the day after the Thanksgiving holiday in late November. “We had one reason after another for consumers to say: ‘I’m going to stick to my list and not go beyond it.’”
Holiday sales are a crucial indicator of the economy’s strength. November and December account for up to 40 percent of annual sales for many retailers. If those sales do not materialize, stores are forced to offer steeper discounts. That is a boon for shoppers, but it cuts into stores’ profits.
Last-minute shoppers like Kris Betzold, of Carmel, Indiana, embraced discounts that were available before Christmas.
Spending by consumers accounts for 70 percent of overall economic activity, so the eight-week period encompassed by the SpendingPulse data is seen as a critical time not just for retailers, but for manufacturers, wholesalers and companies at every other point along the supply chain.
The SpendingPulse data include sales by retailers in key holiday spending categories such as electronics, clothing, jewelry, luxury goods, furniture and other home goods between Oct. 28 and Dec. 24. They include sales across all payment methods, including cards, cash and checks.
It is the first major snapshot of retail sales during the holiday season through Christmas Eve.
A clearer picture is to emerge next week as retailers such as Macy’s and Target report revenue from stores open for at least a year. That sales measure is widely watched in the retail industry because it excludes revenue from stores that recently opened or closed, which can be volatile.
Despite the weak numbers out on Tuesday, retailers still have some time to make up lost ground. The final week of December accounts for about 15 percent of the month’s sales, said Michael McNamara, vice president for research and analysis at MasterCard Advisors SpendingPulse.
As stores offer steeper discounts to clear some of their unsold inventory, they may be able to soften some of the grim results reflected in Tuesday’s data.
Still, this season’s weak sales could have repercussions for next year, McNamara said. Retailers will make fewer orders to restock their shelves and discounts will hurt their profitability. Wholesalers, in turn, will buy fewer goods and orders to factories for consumer goods are likely to drop in the coming months.
Online sales, typically a bright spot, grew only 8.4 percent from Oct. 28 through Saturday last week, according to SpendingPulse. That is a dramatic slowdown from the online sales growth of 15 to 17 percent seen in the prior 18-month period, according to the data service.