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Saturday, October 30, 2010

Consumer Spending in October is Anemic (Gallup)

Spending averaging $62 per day in October
-- up from September, but down from a year ago

By Dennis Jacobs

PRINCETON, NJ -- Americans' self-reported spending in stores, restaurants, gas stations, and online averaged $62 per day during the first four weeks of October. That figure is up from $59 in September and is about the same as the $63 figure from August. From a broader perspective, spending remains in the 2009-2010 new normal monthly average range of $59 to $72 and is far below the 2008 recessionary spending range of $81 to $114.

Weekly Self-Reported Spending Up From 2010 Lows
Gallup's consumer spending measure over the last two weeks (ending Oct. 17 and Oct. 24) has averaged $67 per day and $65 per day, respectively, slightly higher than the estimate for all of October to date. The increase is likely a result of Halloween shopping, given that in the past, Gallup has seen increases in spending during the second half of October.

The latest weekly figures are also up from late September, which saw some of the lowest spending weeks of 2010. Over the past four weeks, spending has averaged slightly below year-ago levels.

Another Tough Christmas for Retailers
While spending is up slightly in October from September, year-over-year comparisons are not encouraging, with spending remaining in the new normal range established in 2009 and continuing into 2010. In turn, this is consistent with Gallup's October Christmas spending estimate that suggests another anemic holiday season for the nation's retailers.

Continued high underemployment, at 10.0% on a not-seasonally adjusted basis, also suggests another weak Christmas spending season, as Americans who are unemployed or fearing job loss tend to spend less, even around the holidays. Further, the increasing cost of gas and other commodities may limit the ability of many Americans to spend in other areas.

While retailers may be able to encourage consumer buying with aggressive discounting, they will do so at the cost of reducing their margins. At the same time, even as consumers enjoy price discounting, they may experience a reduced selection of goods as retailers try to keep their inventories lean.

There could be better news ahead, perhaps if the Federal Reserve acts next week to promote economic growth and/or if the results of the midterm elections make some consumers feel better. Regardless, until there is an indication of significant change, Gallup's data suggest another anemic holiday sales season ahead. Gallup

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