It seems to come earlier and earlier every year, doesn’t it? No, not Christmas ads on TV, but the annual media festival of gloom and doom surrounding holiday-related retail sales.
This year, it started in August, when temperatures were in the 100-degree range across much of the country. Hurricane Katrina wasn’t even a ripple off the coast of Africa, and CNN was doing a downbeat piece called “Dreaming of a Blue Christmas.” Four full months before the holiday, CNN was asking how higher fuel prices were going to negatively impact America’s Christmas cheer: “Consumers are pinched. Retailers are squeezed. Who'll get bruised first by higher fuel prices as the countdown to the holiday shopping season gets underway?”
By October, these Scrooge-like predictions by journalists and newscasters became even more ominous. They claimed higher inflation, higher gas prices, and higher heating and electricity bills this winter will cause Americans to significantly cut back on their Christmas spending. Reporter Tom Costello on the “NBC Nightly News” did a segment on October 14 about rising energy costs, with a vignette of a woman filling up her gas tank stating: “I’m cutting my Christmas list way back this year. I’m going to make crafts and bake.”
Costello wasn’t alone:
Businesses don’t share the same sentiment. The National Retail Federation announced on October 18 that consumers are feeling significantly more festive than the media are suggesting. According to the National Retail Federation “the average consumer plans to spend $738.11 this holiday season, up 5.1 percent from the previous year.”• CNN’s Ali Velshi did an equally negative story on October 17 entitled “Perfect storm forming in the Economy.” In it, Velshi said: “Investors are saying that this may not be a great season. We’re already seeing weakness. And right now, we’re already hearing some people say, some of these doomsayers say that for the first time since 1996, we may actually sell less this season, this holiday season, than we did the previous year. That’s unheard of.”
• The Washington Post reported the economy in a similar vein on October 19: “With millions of Americans feeling pinched by higher gas prices and worried about soaring home heating bills this winter, retail experts say, stores are planning to lure shoppers with low prices right from the start. Major discount retail chains have already seen core customers begin to rein in spending, so merchants are sharpening their Sharpies and getting ready to slash.”
The NRF is not an organization to be ignored. When most in the media were predicting a horrible Christmas in 2001 following the 9/11 attacks, the NRF predicted year-over-year holiday sales growth would be between 2.5 and 3.0 percent. That ended up being pretty close to the final tally.
So, why the disconnect? Well, as reported by the Free Market Project in early September, the media have been forecasting an economic downturn since Katrina made landfall. To date, none of these dire predictions have panned out. In fact, just this week, there have been a slew of economic reports that have come in better than Wall Street expected, including stronger home sales in September, much lower than expected first time jobless claims last week, and a much rosier analysis from the Federal Reserve’s “beige book” report. In fact, the report suggested Hurricane Katrina is having little impact on the economy outside of the Gulf Coast region.
Yet, maybe the most positive event for the upcoming Christmas season that the media are ignoring has been the huge decline in energy prices lately. The average national gas price is now at 2.69 per gallon, six cents below where it was right after Rita hit and only nine cents above the same point after Katrina. According to an October 20 Bloomberg article “Crude oil fell and gasoline plunged to the lowest since June as Hurricane Wilma became less of a threat to oil fields in the Gulf of Mexico.”
This week has also seen reports from various energy agencies indicating that inventories of natural gas, oil, and gasoline are beginning to be replenished as a result of more facilities coming back on line that were knocked out by hurricanes Katrina and Rita. Also, as a result of the higher energy prices that immediately followed Katrina’s arrival, demand for gasoline fell by almost 4 percent in September resulting in the biggest year-to-year decline in this statistic in more than a decade. And the National Oceanographic and Atmospheric Administration is predicting a warmer winter than usual: “NOAA meteorologists predict this winter to be warmer than the 30 year norm, yet cooler than last year,” said an agency release.
Add it all up, and energy prices this winter might not be anywhere near as high as the media are predicting. This means that the consumer is likely not as financially strapped as recent reports suggest, and as the NRF is forecasting, Americans might spend a lot more this holiday season than the press Scrooges believe.
