[Masthead] Partly Cloudy ~ 58°F  
High: 62°F ~ Low: 45°F
Monday, May 2, 2016

Extension Line

Monday, November 29, 2010

By the time you read this, "Black Friday", the day after Thanksgiving, is behind us. This week, I want to share portions of a recent article written by Liesl Eathington, Iowa State University Department of Economics Assistant Scientist, discussing the 2010 holiday retail sales outlook.

Many people will be watching the 2010 holiday shopping season for signs of improvement in Iowa's economy. The "holiday shopping" season is an unofficial term, but generally applies to retail industry sales that occur during the months of November and December. Measures of holiday sales include department and discount store merchandise, furniture and home furnishings, home improvement and garden supplies, groceries, sporting goods, electronics, and other traditional retail goods. Sales by restaurants and bars, motor vehicle and parts dealers, fuel dealers, and gasoline stations are excluded.

It is important to note that a large fraction of our so‐called holiday shopping includes ordinary spending to sustain our own households during the months of November and December. While we can't measure discretionary holiday purchases separately from ordinary household purchases without conducting detailed consumer surveys, we can look at changes in overall holiday spending from one year as an indirect gauge of consumers' willingness and ability to spend.

The dampening effect of recessions on consumers' holiday shopping is quite evident when we examine trends in per capita holiday season sales over time. After rising rapidly in the latter part of the 1990s, real per capita holiday spending leveled off in the period from 2000 through 2003. Spending levels climbed annually from 2003 through 2005 before leveling off again in 2006 and 2007. The correction in 2008 was severe; average per capita holiday spending in 2008 plummeted nearly 8 percent compared to 2007. Sales improved only slightly in 2009, increasing by less than 1 percent compared to 2008.

A recent national survey by a private market research company questioned consumers about their intentions for holiday shopping in 2010. About 61 percent of the survey participants planned to spend about the same on holiday purchases in 2010 compared to the amount they spent last year, 9 percent planned to spend more, and 30 percent planned to spend less.

Although it's tempting to use the strength or weakness of holiday retail sales as a barometer for our economic recovery, we don't need to wait for the retailers to tell us how we're doing. In fact, many indicators suggest that we should be more concerned about the longer term well‐being of Iowa's households and less concerned about how much they spend on gifts during November and December.

*Recent poverty estimates suggest that annual incomes for 7.7 percent of Iowa's families were below the federal poverty level last year.
*Nearly 20 percent of Iowa children under age six were living in poverty last year.
*More than 52,000 Iowa households received Food Assistance payments in October of 2010, which was nearly 10 percent more than last year at this time.
*In the third quarter of 2010, foreclosure proceedings were initiated on more than 2,200 Iowa homes, about 15 percent more than the same period last year.
*There were more than 8,300 filings for Chapter 7 or Chapter 13 bankruptcy since January 1, 2010.

The retail sector's performance in any given year reflects, rather than determines, the well being of Iowa's much larger household sector. Consequently, even a very strong holiday retail season, cannot, in and of itself, cure Iowa of its recession hangover. Here's hoping for a better 2011.