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Mon November 26, 2012
A Jolly Christmas? Retailers Count The Extra Days
Originally published on Tue November 27, 2012 8:49 am
For merchants, the stars are lining up — at least so far.
Online shopping jumped more than 28 percent on Cyber Monday compared with a year ago, according to IBM Benchmark. And the National Retail Federation says Thanksgiving weekend spending shot up to $59.1 billion, nearly 13 percent more than last year's $52 billion.
Fortunately for retailers, those good numbers may keep coming because the heavens have lined up in such a way that the 2012 calendar "is a real plus," says Chris Christopher, an economist with IHS Global Insight, a forecasting firm. "There are more shopping days" than we've had in years, he notes.
That's because Thanksgiving fell on the earliest date possible. Since most people don't begin holiday shopping until Black Friday, separating the Thanksgiving turkey from the Christmas goose by as many days as possible is a good thing for retailers.
An Extra Weekend
But there are two other timing factors that may really help this year. One is that Christmas Eve lands on a Monday. Procrastinators — and you know who you are — will have both Saturday and Sunday, Dec. 22 and 23, to go to the mall. Retailers love it when they have a whole weekend to lure last-minute shoppers just as the Christmas Eve pressure is peaking.
And online dawdlers also can shop on that final weekend and still get the gifts delivered before sunset on Monday. Yes, you may pay more for the service, but Express Mail, UPS, FedEx and others will be making delivery rounds on Monday, Dec. 24. "This year is the best of times for people who like to wait until the last minute to shop," Christopher said.
But there's yet another calendar event that offers a sort of Powerball bonus. It's the fiscal cliff. If retailers' timing luck holds, that political and economic threat will be eliminated just in time to spur a celebratory round of shopping on the weekend before Christmas.
A Fiscal Cliff Surprise?
Here's how it may play out: Congress must fix the so-called fiscal cliff — a complex cluster of federal spending cuts and tax-break expirations that all come together at year's end.
Lawmakers are scrambling to put together a deal in this calendar year, and most economists and pundits think they will find some way to compromise. But for now the threat of inaction may be dampening many people's enthusiasm for shopping.
For example, it's not yet clear how many automatic spending cuts will kick in next year. If Congress were to allow all of the currently scheduled reductions to take effect, many government contractors would lose their jobs next year. And many taxpayers know their tax bills may shoot up in January. None of that puts people in the mood to spend.
The White House is certainly aware of the threat hanging over the economy. On Monday morning, it issued a report in which its economic advisers say that "as we approach the holiday season, which accounts for close to one-fifth of industry sales, retailers can't afford the threat of tax increases on middle-class families."
In a statement on the White House report, National Retail Federation CEO Matthew Shay agreed that congressional inaction would lead to "stifled job creation, and dampened consumer confidence, which will ultimately lead to lower retail sales and potentially another recession."
Optimists note that lawmakers are not just members of Congress. They also are human beings who would like to be home for the holidays.
An Incentive For Lawmakers
So members of Congress have a great deal of incentive to wrap up any legislative package dealing with the fiscal cliff by Friday, Dec. 21. Christopher said he believes a compromise will be reached by that date.
If he's right, the cloud of uncertainty would lift just in time to brighten Americans' economic mood as they go shopping on that final weekend before Christmas.
Of course, the gamble could go the other way. If Congress remains hopelessly deadlocked as of Dec. 21, it could throw a big wet blanket over the economy and discourage shopping in those crucial days leading up to Christmas.
For now, the retailers are crossing their fingers. "It is encouraging to see the Administration's acknowledgement that retailers and their customers will be among the hardest hit if our elected officials fail to address ongoing economic uncertainty," says Shay, in the retail trade group's statement. "The time for action is now."
So, sure, the Mayan calendar may say the world is ending on Dec. 21, but the countdown calendar for the fiscal cliff and Christmas Eve is pointing to good times.