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12/16/2009
Regional holiday sales update
Update: This is the last SouthPoint entry for 2009. Postings will resume on Jan. 6, 2010.
After a tough year of high unemployment, stagnant wage growth, low consumer confidence, and overall uncertainty about the future, it should come as no surprise that holiday sales thus far have been less than stellar.
Currently, holiday sales are relatively flat compared with last year, but what makes 2009 different from 2008 is retailers were not as optimistic this time around and as a result were better prepared for disappointing sales.
In our monthly districtwide retail survey, 100 percent of respondents were satisfied with their inventory levels in November. They have been allowing inventories to deplete throughout the past months and adequately predicted how much inventory was needed during their holiday sales season.
Regional consumers are out and about in large numbers, but they are hunting for discounts and spending with extreme caution. Gift card sales were very weak this holiday season as people prefer to get more value for their dollar by purchasing discounted merchandise.
An interesting anecdote from a Southeastern business contact was that credit card sales are down significantly from last year, but debit card purchases are up as much as credit cards are down; this shift suggests that people don't want to spend beyond their means.
Online shopping
Retailers were armed with promotions both in store and online. According to Time magazine, CyberMonday.com had the best online discounts from more than 700 retailers featuring new deals every hour, most accompanied by free or discounted shipping.
Reports from comScore say Black Friday web-based purchases reached $595 million, up 11 percent from last year. Cyber Monday web-based purchases reached $887 million, up 5 percent from last year. Between November 1 and December 11 online sales have reached more than $199 million, a 3 percent increase from the same period last year.
Some interesting graphs on comScore's blog show the number of daily average discount offers per store during the days before and after Thanksgiving. The graph compares the past four years, and 2009 has some of the highest levels.
What to expect for the rest of the holiday season
December 19, the Saturday before Christmas, could be another big shopping day. In past years there have been high sales on the Saturday before Christmas. Even with that potential sales bump, the National Retail Federation expects total holiday sales to drop 1 percent in 2009 from year-ago levels versus a 3.4 percent decline in 2008; overall holiday sales are expected to decline but not as much as they declined in the last year.
So, to sum up 2009 holiday sales thus far in a few quick points:
- Holiday retail sales are relatively flat compared with last year's levels.
- Online shopping and Cyber Monday, in particular, were huge this year.
- People were out and about hunting for bargains.
- The bargains were out there to be found.
- Consumers spent cautiously—higher traffic, but lower average spending.
- Retailers did not experience anything too unexpected.
By Courtney Nosal, a research analyst in the Atlanta Fed's research department
December 16, 2009 in Inventories, Retail, Southeast | Permalink
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12/09/2009
Holiday sales cheer, revisited
Two weeks ago we wrote that recent reports "suggest that this holiday shopping season may indeed be a bit more cheerful than last year."
Since then, we have learned through additional discussions with our retail contacts that though early December traffic is up, sales are not. Retailers said that shoppers continue to concentrate on deeply discounted items. Retailers are keeping inventories lean but at levels that are adequate for their sales. Demand for electronics is increasing, and some shortages have been reported.
National information also points to a slow start to the holiday sales season. In its report on Black Friday (the day after Thanksgiving), the National Retail Federation (NRF) reported that:
"According to NRF's Black Friday shopping survey, conducted by BIGresearch, 195 million shoppers visited stores and websites over Black Friday weekend, up from 172 million last year. However, the average spending over the weekend dropped to $343.31 per person from $372.57 a year ago. Total spending reached an estimated $41.2 billion."
A report from Middle Tennessee State University's Office of Consumer Research reported a decline in consumer confidence in December:
"A key question for local retailers is whether or not this decrease in consumer confidence will have a negative effect on consumer spending heading into the very important Christmas and Holiday shopping season. Unfortunately, negative views of the current economy, fears about the current job market and future contractions in the job market, and concerns about personal finances suggest that many local consumers are still keeping a tight grip on their wallets."
The report continues:
"Depressed consumer confidence does not bode well for retailers as we enter into the Christmas and Holiday shopping season. When asked about their expected Christmas spending, 46 percent of local consumers plan to spend less than they spent last year. Only 8 percent plan to spend more than they spent last year. The table below shows the results related to expected Christmas and Holiday spending for the last three years."
So our optimism heading into December does not appear to be supported by early holiday sales activity. We'll keep tabs on what retailers pass on to us and continue to review indicators for signs of a strengthening recovery.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
December 9, 2009 in Retail, Southeast | Permalink
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12/02/2009
Southeastern states face unemployment insurance fund shortfalls
As of mid-November, roughly 5.4 million Americans were receiving unemployment insurance, not including an additional 4.2 million collecting some form of extended benefits. Regular unemployment benefits typically run for 26 weeks, but the severity and duration of the current downturn have caused many people to exhaust their regular benefits. The table below shows unemployment insurance exhaustion rates for Southeastern states in October. In Florida, for instance, about 70 percent of claimants who received their first unemployment insurance payment six months prior, about 26 weeks back, have exhausted their regular benefits.
| Exhaustion Rates October 2009 | |
|
Alabama |
40.25% |
|
Florida |
70.16% |
|
Georgia |
57.59% |
|
Louisiana |
45.21% |
|
Mississippi |
45.39% |
|
Tennessee |
52.28% |
Elevated levels of unemployment insurance claims, the length of time that many claimants remain on benefits, and weak hiring across the Southeast have caused many states to rapidly deplete their unemployment trust funds. Currently 25 states are borrowing from the federal government, including Florida and Alabama. Alabama had $96.6 million and Florida had $691 million in outstanding loans from the Federal Unemployment Account, as of Nov. 27, 2009. Moreover, according to the U.S. Department of Labor, unemployment trust funds in Georgia, Louisiana, and Tennessee are not adequately reserved, meaning that the states do not have enough funds to pay benefits for one year at a rate equivalent to the average of the three worst 12-month periods in their history without any revenue inflow.
States across the nation need to replenish their trust funds, and as a result firms could see unemployment insurance tax hikes. Although unemployment insurance tax makes up a relatively small share of total costs to an employer, compared with wages and other benefits, a significant increase in the tax could be a burden on employers. One example is the case of Florida. Because Florida's trust fund balance dipped below a comfortable level, Florida's state unemployment insurance tax will increase from the current minimum of $8.40 per employee per calendar year to a minimum $100.30 per employee starting January 2010. (The current maximum of $378 per employee rises to $459 per employee in 2010).
By Menbere Shiferew, a senior economic research analyst in the Atlanta Fed's research department
Additional links
Employment & Training Administration Unemployment Insurance Finance Page
ETA Homepage
December 2, 2009 in Southeast, Unemployment | Permalink
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