November 28, 2003

Expectations of Christmas Sales

The Christmas shopping season has started, with mixed expectations:

Retailers Usher in the Holiday Season: ...Stores have steeled themselves for a shopping letdown, with inventories that average 7 percent below last year's levels. Merchants like Sears, Roebuck and Co., Staples, K-B Toys, and several major mall operators reported that traffic and business as of Friday afternoon were at least as healthy as a year ago.

No must-have item has emerged this season, although the best sellers in toys include Fisher-Price's Hokey Pokey Elmo, Spin Master's Mighty Beanz collectible plastic toys, MGA Entertainment's Bratz dolls and Mattel's Hot Wheels T-Wrecks playset. Michael Niemira, vice president of Bank of Tokyo-Mitsubishi Ltd., predicted a sales gain of 4.5 percent for the November-December period, the best performance since 1999, when the tally rose 5.4 percent. He based the estimate on sales from stores open at least a year, considered the best indicator of a retailer's health. Last holiday season's results were unchanged from 2001.

The Washington-based National Retail Federation projected total holiday sales to rise 5.7 percent to $217.4 billion.

Posted by DeLong at November 28, 2003 09:42 PM | TrackBack


Luxury retailers may do well, but we went to a fairly popular outlet mall (and it took some getting up nerve to do it the day after Thanksgiving) and the parking lots were about half empty.

I don't know if there's enough of a market for five-figure shower curtains to make up for Joe Sixpack splurging on things that cost $100.

Posted by: julia on November 29, 2003 01:21 AM


The notion that Joe Sixpack has a meaningful effect on aggregate demand is a bit dated. According to the Fed's most recent Survey of Consumer Finances, more than 2/3 of personal income is earned by the top fifth of the public. When under-reporting, capital gains and the recent tax cuts are factored in, the share of spending power controlled by the top quintile is probably much higher. And the rich spend more than is sometimes assumed. They may have a low MARGINAL propensity to CONSUME out of transitory income. But their AVERAGE propensities to SPEND (on consumption and capex) are quite high.

I wish Joe's interests loomed larger in politics, but I don't worry that he will undermine the expansion. Increasingly, and sadly, we have to watch mostly the rich to figure out how demand will evolve.

What I don't get is why we place such a focus on Christmas sales forecasts. Do these have a history of being correct? How would an equity analyst or trucker know what toys are going to sell? And is the U.S. expansion really beholden to strong Elmo sales?

Posted by: Gerard MacDonell on November 29, 2003 05:30 AM


"Increasingly, and sadly, we have to watch mostly the rich to figure out how demand will evolve."

Interesting argument. Still, the lower 80% in income do not spend evenly through the year and do buy gifts after Thanksgiving. The extent of income and wealth inequality that will appear once we see the effects of fiscal changes from 2001 on is not a pleasing thought. We are further trapping middle class families in debt.

Posted by: anne on November 29, 2003 06:33 AM


Again, there is debt extension. Lots more than those in the upper 20% income group are buying houses and cars. Middle class debt has long seemed a problem, but debt keeps being extended. There is no reason to believe debt extension stops today.

Posted by: anne on November 29, 2003 06:40 AM


I wonder if there's any data to suggest what the upper limit to debt extension is. I would think that consumer behavior would not be all that unpredictable. I know, personally, how much debt I am willing carry before I quit spending. On the aggregate, there must also be a point where consumers do say enough is enough". I wonder what that point is, 13.5%, 15%, 20% perhaps? No studies on this?

Posted by: jack on November 29, 2003 07:02 AM


Gerard, where do you read in the survey that the top quintile takes home over 2/3 of income? The before-tax family income tables lead to a figure of ~59% in 2001, as compared with ~55% in 1995.

While their relative share is shrinking, what the bottom 80% does with their 41% of personal income is relevant.

Posted by: Mark on November 29, 2003 07:39 AM


Isn't it better if all kids had a bike, roller blades and computer than if 5% of the kids had the $60,000 miniture Hummer from Neiman Marcus and Prada shoes for each day of the week and a table at the Four Seasons (Edgar Bronfman has had once since he was twelve years old).

Posted by: Cal on November 29, 2003 08:43 AM


On the question of what is the upper limit of debt.

The real problem is that there is no way to forecast the upper limit. Evey cycle, at least
since the 1970s, the issue of debt limiting
consumer spending has been raised. But every
cycle the measures of the debt burden go to now highs. So there is no way of knowing when we will
hit that limit, and debt servicing will be a major factor limiting consumer spending.
I suspect that it will not be an issue that create a cyclical perak, rather it will be an issue that creates a major problem in trying to get a new recovery off the ground.

Posted by: spencer on November 29, 2003 09:04 AM


The dirty little secret about wealth is that rich people are, on average, smarter than poor people. They know more, they have more varied sources of information, and their brains process the data faster.

This is why rich folks get to set the trends in toys in the stores.

I've been rich, am currently poor, and intend to be rich again. It's slightly more fun: you get better toys to play with.

Posted by: David Lloyd-Jones on November 29, 2003 09:19 AM


I have started the Buy nothing on Fridays movement.

The Buy nothing Friday movement will work this way.

You will tell your friends and family and colleagues who do not use the net, to avoid buying anything on Fridays. You and everyone you speak to will tell their merchants that we do not support the chimp and we're going on a purchasing strike on every Friday until the Nov 2004 election. You also tell them that you hope they will do everything they can to help vote the chimp out and their republican congresspeople out in 2004.

You will tell your friends, family and merchants If the chimp steals another election or somehow wins, you will also avoid purchasing items on Thursday and this will inflict more punishment on them for not doing enough to unseat the chimp in the 2004 election.


(put this link in a browser at work and at a public library and leave the page showing. Make it a browser favorite too)


Boycott the LA Dodgers, Arnold's movies, the Viper Car Alarm, Disneyland until Arnold resigns leaving Cruz Bustamante to serve as Governor.

Spread the word.

Boycott the LA Dodgers, Arnold's movies, the Viper Car Alarm, Disneyland until Arnold resigns leaving Cruz Bustamante to serve as Governor.

Do not go to any games where the LA Dodgers appear as visitors or at home and tell the Dodgers you will see their games after they get Arnold to resign. Browse and send them email from their website telling them to get Arnold to resign or you will not see their games.

Browse these websites and email them from their site that you will not buy nor rent Arnold's movies from the video store. makers of the Viper Car Alarm once owned by Darrell Issa and email them from their website that you will not buy the Viper Car alarm. and email from their website that you will not go to Disney Land.

You will refrain from doing business with these 4 entities until Arnold Schwarzenegger resigns leaving Cruz Bustamante to take office as Governor.

Stop the Republican Texas redistricting effort.

Call JC Penney Corporate Headquarters in Plano, Texas and tell them unless they get Governor Goodhair Perry to stop redistricting until 2010 when it should happen again, you will not set foot in another JC Penney Store again.


So let it get written, so let it get done.

Call them at 1-800-322-1189



"The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness."

- John Kenneth Galbraith (1908 - )

Posted by: buckfush on November 29, 2003 09:57 AM


I have to agree - the rich may have most of the money, but they only have a finite need for consumer appliances, books, toys, food...

I very much doubt that the amount of money the upper income bloc is putting into the consumer economy eclipses the money that the rest of the country spends on low-end consumer goods just yet.

Posted by: julia on November 29, 2003 10:09 AM


Here's Calvin's take in case anyone reads past the last post.

Posted by: rilkefan on November 29, 2003 10:17 AM


Ack, was referring to the penultimate post. And my html got eaten by the preview - I was trying to link to" >this.

Posted by: rilkefan on November 29, 2003 10:21 AM


D L-J: Paris Hilton is richer than we'll ever be (combined). She doesn't seem too intelligent, but she appears to have interesting and varied play things.

Posted by: Cal on November 29, 2003 04:24 PM


Rich people in the current day are generally really good at manipulating the system, largely (it seems) because they hire less-rich people who have figured out how to do that (lawyers, congressmen, accountants, lobbyists - a group whose venn diagram looks like a spirograph).

Ayn Rand would have been terribly disappointed, except for the contempt for democracy part.

Posted by: julia on November 30, 2003 02:58 AM


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