As the US economy struggles toward the year-end holidays, forecasters are predicting one of the weakest holiday shopping seasons in years, which may hamper the recovery.
Preliminary forecasts suggest the holiday season -- which traditionally accounts for a big share of revenues and profits for retailers -- will take a hit as consumers remain cautious in the wake of the Sept. 11 terrorist assault.
PHOTO: AP
"US retailers are expected to experience the weakest holiday season since the recession of 1991," said a report from the consulting group Retail Forward, which predicts tepid growth of 1.5 percent growth in overall holiday retail sales.
But Frank Badillo, an economist with the group, said the growth figures belie the weakness in retailing, which has also been hurt by price-cutting in a general deflationary environment.
Badillo said that a major category of retail sales, which includes general merchandise, apparel and electronics, is expected to decline 1.5 percent in the fourth quarter.
"There has never been a decline like this in retail sales," he said. "It's pretty dramatic."
Even before Sept. 11 last week's events, "we all expected a weaker Christmas," Badillo said.
The National Retail Federation recently cut its outlook for fourth-quarter and holiday shopping due to the "psychological and economic impact" of the September 11 terrorist attacks.
The retail group said its sales growth forecast for the fourth quarter had been cut to 2.2 percent from an earlier forecast of 4 percent growth. The group is predicting holiday retails sales to grow a tepid 2.5 to 3 percent.
In one sign of weakness in consumer spending, the Commerce Department said Friday that retail sales fell 2.4 percent in September, the steepest decline since current records began in February 1992.
"The effects of the recession are beginning to be felt. Wages are being hurt, amid record reports of layoffs, and that means retail sales are hitting a wall," said Brian Wesbury of the investment firm Griffin, Kubik, Stephens and Thompson.
Consumer spending represents about two-thirds of US gross domestic product. And with layoffs rising and the US economy likely to go into recession, the behavior of consumers in the all-important holiday season could determine how quickly the economy recovers.
The importance of the holiday season has not been lost on political leaders, who are working on a stimulus package to put more money back into the hands of consumers before the critical holiday season.
House Democratic leader Dick Gephardt said the White House and Congress want "to get this done as quickly as possible ... if you're a consumer, we need you back in the malls doing things in making this economy go forward."
But Badillo said tax rebates are unlikely to mitigate the holiday gloom for most retailers.
"Our analysis was that the rebates weren't go to have much of an impact because people in times of growing uncertainty are going to save most of that money," he said.
Yet not all forecasts are pessimistic.
A Deloitte and Touche survey of 5,100 people found 77 percent say they are confident that a strong economy will return next year.
"This is good news for retailers, who weren't expecting the holiday shopping season to be particularly bright this year," said Deloitte analyst Tara Weiner.
Seventy percent of the survey respondents said they plan to spend about the same as last year on their holiday purchases.
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