by Doug Desjardins
The forecast for holiday retail sales was never great to begin with, but leading economic indicators are hinting that they may fall short of what were already meager expectations.
The Reuters/University of Michigan Survey of Consumers released Nov. 12 predicts that unemployment in the U.S. will hit 10.75 percent by the end of the year, rising from the 10.2 percent mark reported by the U.S. Bureau of Labor Statistics in October. The survey also reported a sharp drop in consumer sentiment, which fell to a reading of 66 in November from a 70.6 reading in October. Economists had been expecting a reading of 71 for November. 
"In real terms, we are probably not going to see an increase in retail sales over the holidays," said Richard Curtin, director of the survey.
The survey also showed that only 10 percent of consumers reported an increase in income in 2009, the lowest figure since the survey started in 1946. And more than 36 percent of consumers reported that their income had declined this year. "This is really a concern for consumers that their financial situation is just heading south and there is really little hope that they can expect it to improve in the year ahead," said Curtin.
That news came the same day that Wal-Mart reported sub-par results for its third quarter. The world's largest retailer, one of the few to prosper during the recession, reported a 0.5 percent decline in same-store sales for the third quarter--despite an increase in customer traffic. The retailer, which had expected same-store sales to be flat or up 2 percent at best, is now expecting fourth-quarter sales to be flat or down 1 percent. Wal-Mart reported a 2.4 percent increase in fourth-quarter sales last year.
"While the economy remains challenging to our customers and to Wal-Mart sales, I continue to be encouraged by both our traffic and our market share gains," said Wal-Mart CEO Mike Duke.
Even a positive report on October retail sales, usually a bellwether for the holidays, hints at a slow holiday season. According to Retail Metrics, total retail sales rose 2.2 percent in October, marking the best overall performance since June 2008 when sales increased 1.9 percent. But those comparisons were made against a terrible month, October 2008, and led research firm America's Research Group to forecast a 2.9 percent decline in spending for the holiday season.
"I don't see anything out there that says October was an exciting month even with retailers advertising 60 percent off," said America's Research Group founder Britt Beemer.
Though research firms differ on their forecast for the holidays, all seem to agree that sales will either decline or be relatively flat. The National Retail Federation expects consumers to spend 3.2 percent less than they did last year while a more optimistic NPD Group forecast projects sales to increase 0.5 to 1.5 percent.
Resources
Sales Rebound from Year's Biggest Drop
Wal-Mart Predicts Flat Holiday Sales
Economy to Impact Two-Thirds of Families this Holiday Season
COUPON TIME
Retailers' loss could be your gain; shop smart and use our Black Friday Sales and Cyber Monday Coupons pages as a guide!
