The economic outlook is hazy as uneasy consumers enter into the busiest shopping season of the year, which could bring less-than-stellar news to big retailers and small businesses alike.
Continue Reading Below
Retailers of all of sizes have already begun slashing prices and several chain stores plan to open their doors on Thanksgiving in an attempt to lure customers. But, it's clear that while analysts expect holiday sales to be almost $580 billion, consumers are not as confident buying big-ticket items, said Chris Christopher, chief economist at IHS Global.
"The real game changer this holiday retail season is that many of the chain stores are combining their online and brick and mortar marketing strategies," said Christopher in a research report. "While the purely cyber retail stores are trying to get in on the action on Grey Thursday and Black Friday -- ahead of Cyber Monday."
Yet, while retailers are trying especially hard for every sale, two reports released this week showed why this season may not be shaping up too well for business.
The Conference Board's Consumer Confidence Index, which fell sharply in both October and November, is now at 70.4, its lowest level in seven months, and well below the 80.2 reading in September.
The latest consumer sentiment report from the University of Michigan and Thomson Reuters out Wednesday showed more optimism, beating expectations and illustrating that sentiment has been picking up steam in the last two weeks (the index increased to 75.1 from 73.5 in October) as wealthier Americans' outlook on the economy improved.
"While rising stock prices and low interest rates will favor holiday sales of upper-end consumers, lower-income households were still more concerned about job gains," survey director Richard Curtin said in a statement.
But, overall, both confidence indicators could predict a slower holiday shopping this season, which is already in line to be more sluggish than last year.
"Despite the improvement in the November figure, the U Mich consumer sentiment remains below its pre-shutdown September level of 77.5," said Goldman Sachs (NYSE:GS) in a statement.
Significant factors leading to the pull back in confidence and a draw back on consumer spending, which drives an estimated 70% of the economy, is clear, says Christopher. He cites the government shutdown, the debt-ceiling issue, Fed-tapering talk and the Affordable Care Act's website's lack of functionality as all having a lingering and negative impact.
But, he said, with a better-than-expected jobs October report, relatively low gas prices and the shutdown now behind us, consumer confidence should gain traction in the next few months.
"Holiday sales will be above water," said Christopher, who pointed out that the holiday shopping season will be more intense than last year since there is one less shopping weekend between Thanksgiving and Christmas Day. "But, still, it's the slowest growth that we have seen since 2009."