Consumers Issue a Cautious Christmas Spending Forecast

Forecasts...excluding consumer input

10/5/10: The International Council of Shopping Centers forecast 

that holiday sales will increase by 3 to 3.5 percent

from a year ago, marking the biggest jump in four years

(sales in 2006 increased 4.4 percent).

  10/6/10: National Retail Federation (NRF) Forecasts Holiday Sales

Increase of 2.3 Percent

--Total Holiday Sales Expected to Reach $447 Billion—

Forecasts...including consumer input

10/25/10: PRINCETON, NJ -- Gallup's initial measure of Americans' 2010 Christmas spending intentions finds consumers planning to spend an average of $715 on gifts, roughly on par with the $740 recorded in October 2009.

The $25 decrease in Americans' holiday spending intentions between October 2009 and October 2010 (not a statistically significant change) contrasts with a $61 year-over-year reduction in intended spending found last October and a $108 reduction found a year prior.

The muted nature of this year's decline is reflected in consumers' own evaluations of their spending changes. According to the Oct. 7-10 poll, 27% of Americans intend to spend less on Christmas gifts this year than what they spent last Christmas -- higher than the 11% who now say they will spend more, but down from the 35% and 33% in 2008 and 2009 saying they would spend less. Prior to the recent recession, Americans were much more closely divided over whether their holiday spending would exceed or trail their spending of the prior year, while more said their spending would be "about the same."

Bottom Line

Americans' average prediction of the total amount they will spend on Christmas gifts this year is not highly encouraging for retailers, who may be hoping for a return to pre-recessionary buying habits. The good news, however, is that the $25 decline in this year's October forecast is far less than what Gallup found in each of the prior two years at this stage in the season and, according to Gallup modeling, would point to a fairly flat year in holiday retail sales if it holds at this level through December. According to the National Retail Federation, there was a steep 3.9% year-over-year decline in holiday spending in 2008. Compared with that, a repeat of the "flat" holiday sales seen in 2009 may be a tolerable, if unwelcome, outcome for retailers who have grown accustomed to the new, more budget-conscious consumer.

Gallup will update this measure in early November and again in early December. The December forecast has historically been a strong indicator of the direction of holiday retail sales, forecasting the extent to which sales will be higher or lower than the previous year. The October figure is not always predictive of the December forecast, however. In 2002, consumers' estimates of how much they would spend increased between October and December; in 2007 and 2008, their estimates decreased, while in 2009, they stayed about the same.