Monday, November 30, 2009

Retail sales expected to drop 1%

From Business Week:


Spending at stores and on Web sites from Nov. 26 to Nov. 29 rose 0.5% to an estimated $41.2 billion from $41 billion a year earlier, the Washington-based trade group said Nov. 29, citing a survey conducted by polling firm BIGresearch.
The higher turnout and lower average spending were in line with expectations,the NRF said. The group is sticking to a forecast for a 1% drop in spending this holiday season.


Consumers who are expecting severe price cut are probably going to be disappointed this holiday season. The reason is that retailers already factored in lower sales in their orders. Thus they ordered less. Thus the have to sell less at higher prices in order to make ends meet.

Compare this with two years ago when retailers ordered too much, since proper demand levels were less clear as the recession had just started. They had large inventories to work down and thus more drastic prices to cut in order to make ends meet.

The disconnect between expectations and reality is where you will see the large price movements, as price is the clearing mechanism for the market.




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