It seems to come earlier and earlier every year, doesnt 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 wasnt 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 Americas
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: Im cutting my
Christmas list way back this year. Im going to make crafts and
bake.
Costello wasnt alone:
CNNs 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. Were already seeing weakness. And right now, were 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. Thats 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.
Businesses
dont 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.
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 Business & Media Institute 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 Reserves 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 Katrinas 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.
Noel Sheppard is an economist, business owner, and contributing
writer to the Business & Media Institute. He is also contributing editor
for the Media Research Centers NewsBusters.org. Noel welcomes
feedback at slep@danvillebc.com.
