“Retailers are going into the holiday season with incredibly low expectations this year. But the economy is actually a little bit stronger than it was a year ago, and consumer confidence appears to be rising just as the holiday shopping season is set to begin,” Vitner said.
2002 will mark the second year in a row that retailers managed to post gains only in the 4 percent range, marking the slowest two years for retailers since 1990 and 1991.
“It is important to note that inflation is much lower today than it was back in the early 1990s. In fact, goods prices have fallen 1.5 percent over the past year. That means the volume of goods sold should rise by nearly 6 percent this year. As a result, stores will likely be extremely crowded, even if sales post only modest gains,” Vitner noted.
Many retailers are going into the holiday season with relatively lean inventories and have hired fewer seasonal workers than they have in the past. “Popular items could sell out quickly and also could lead to long lines at the checkout counter,” Vitner said.
The 2002 calendar will also contribute to a greater holiday rush than usual. Thanksgiving comes extremely late this year and there are six fewer shopping days between Thanksgiving and Christmas than there were in 2001. In addition, Hanukkah begins this Friday night, one night after Thanksgiving, which contributes to a fast and furious holiday season.
Early reports from November suggest that consumer confidence rebounded during the month, and consumer finances are in much better shape this holiday season. The unemployment rate has risen but remains relatively low at just 5.7 percent. Moreover, nearly 63 percent of the working age population is currently employed, and wages and salaries are up 3.5 percent over the past year, nearly two percentage points ahead of inflation.
“With real incomes rising and the stock market looking a little firmer recently, parents may even splurge a little bit this year,” said Vitner.
A Regional Outlook for the Holidays
Regionally, Wachovia expects sales to rise the most in Florida and parts of the Southeast and parts of the West Coast, where population growth has been stronger and employment conditions have held up relatively well. Areas of the country where manufacturing still plays a dominant role, however, will lag slightly behind the rest of the country.
As for Florida’s major metropolitan areas, Vitner is expecting some of the strongest gains to be along the East Coast. South Florida, which includes Miami, Fort Lauderdale and West Palm Beach, should see fairly strong gains this year, with sales rising at least 5 percent. Orlando and Tampa will also see strong gains, while Jacksonville should see gains in the 4.5 percent range.
Georgia will only see modest gains for the 2002 holiday season. The Atlanta region, which historically has produced some of the largest gains in the nation, is expected to see 4.5 percent growth. Atlanta’s economy was hit particularly hard by the recession and has had difficulty gaining traction during the recovery.
The Carolinas are also expected to post solid, yet unspectacular, gains. The Charlotte area will see some of the region’s strongest gains with merchants expected to see sales rise at least 5 percent. The Raleigh/Durham area will do nearly as well, with sales rising 4.5 percent. The addition of two new shopping malls should help attract shoppers from surrounding areas, helping offset the still soft local economy.
Other East Coast bright spots include the greater Washington, D.C., area, where sales are expected to climb 6 percent, as the regional economy has clearly taken a turn for the better in recent months. Hiring has picked up, and the unemployment rate has fallen back to just 3 percent. The Baltimore area will also see solid gains this year, with sales rising 5 percent over 2001.
Pennsylvania will see gains rise roughly in line with the rest of the country. Spending in the Lehigh Valley is expected to rise 4 percent, and sales in the greater Harrisburg area will increase just 3.5 percent. The Philadelphia area is expected to post slightly stronger gains, with sales climbing 5 percent. Some of Philadelphia's strength will come at the expense of surrounding areas, as shoppers are drawn into the Philadelphia region's greater mix of retailers.
After a sluggish season last year, merchants in New York and New Jersey should see gains in the 5 percent range. Hiring has picked up across the state in recent months, particularly in Northern and Central New Jersey, and the unemployment rate has declined.
Mark Vitner is Senior Economist at Wachovia Corporation. He has been issuing a forecast for the holiday shopping season for each of the past 18 years.
Wachovia Corporation (NYSE:WB), created through the September 1, 2001, merger of First Union and Wachovia, had assets of $334 billion and stockholder's equity of $32 billion at September 30, 2002. Wachovia is a leading provider of financial services to 20 million retail, brokerage and corporate customers throughout the East Coast and the nation. The company operates full-service banking offices under the First Union and Wachovia names in 11 East Coast states and Washington, D.C., and offers full-service brokerage with offices in 49 states and global services through more than 30 international offices. Online banking and brokerage products and services are available through wachovia.com.
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