The Atlanta Fed's SouthPoint offers commentary and observations on various aspects of the region's economy.
The blog's authors include staff from the Atlanta Fed's Regional Economic Information Network and Public Affairs Department.
Postings are weekly.
Will Retail Sector Maintain GDP Momentum?
There is little doubt that technology has changed the way we live. Online social networks like Twitter and Facebook have changed the way we communicate, and the rise of e-commerce has given us the convenience to shop from the comfort of our homes. Personally, I cannot live without my debit card, and this year I did more online holiday shopping than ever before. Move aside Black Friday, because Cyber Monday is my new best friend! 60 percent off video games? Yes, please. Everything in stock and guaranteed to arrive in time for the big day? Great. Free shipping? Fantastic! And the best part? I'm on my patio sipping coffee, watching the palm trees sway in the breeze and the duck swim in the lake while I tap away—on my smartphone.
While most organizations today have an online storefront, not all of the Atlanta Fed's Miami Branch retail contacts are thrilled about this migration. Last month, some businesses discussed the challenges that are arising as technology continues to change consumer buying habits. One change contacts often report is that their customers who shop online are less likely to purchase add-on items like warranties than when they shop in the store. To mitigate this challenge and boost sales of these items, some online sellers suggest to consumers, when they add something to their shopping carts and again when they check out, that they might like to also purchase the add-on items.
According to information released by IBM Digital Analytics, Cyber Monday this year was the busiest online shopping day of the year, with an 8.5 percent increase in sales from 2013's Cyber Monday. Overall online sales during "Cyber Week"— a five-day period from Thanksgiving Day through Cyber Monday—increased by 12.6 percent over the same time period last year, according to IBM. Sales made with mobile devices increased year over year by 27.6 percent, and these transactions drove more than half the online sales throughout Cyber Week.
So why do analysts spend so much time slicing and dicing consumer spending patterns? Mostly because consumer spending accounts for about 70 percent of total gross domestic product (GDP). This year, there is much anticipation as to whether or not the retail sector will do well enough during the holiday season to maintain the momentum that we had seen earlier in the year. According to the second estimate for GDP growth in the third quarter, real GDP expanded at an annualized rate of 3.9 percent, faster than the initial 3.5 percent estimate. Upward revisions were made to consumer spending, private inventory investment, and nonresidential equipment and software, while net exports were revised downward (see the chart).
Will the sales activity from Cyber Week have enough "oomph" to meet estimated GDP growth for this last quarter? We'll find out more when the advanced estimate for fourth-quarter GDP is released on January 30, 2015. Until then, click to shop till you drop!
By Marycela Diaz-Unzalu, a senior Regional Economic Information Network analyst at the Atlanta Fed's Miami Branch
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Retailers Heading into 2014 with Momentum
"Thank you...thank you very much."—Elvis Presley
Back in mid-December 2013, retailers appeared to be channeling Elvis Presley and the holiday song he popularized, "Blue Christmas," when preliminary holiday retail sales were somewhat disappointing. Well, y'all: Elvis has left the building! Compliments of heavy discounts, promotions, and last-minute deals, retailers ended the year with positive growth. Thank you...thank you very much.
According to the National Retail Federation, total retail sales increased 3.8 percent year over year, and nonstore sales (online and e-commerce sales) grew 9.3 percent.
The shopper—and her behavior—is interesting to follow. So why did I just refer to the shopper as "her"? Ask any retailer, you'll find that most shoppers are female. And in 2013, volatility seemed to be her middle name as her purchases fluctuated considerably. So let's take a look at her shopping behavior in core retail sales, which is a statistic that removes automobile sales, gasoline, and building materials. Core sales ended 2013 with the highest results since before the recession, in 2006 (see the chart).
Retailers did end the year on a positive note, even with the deep discounts and promotions. As I once heard a colleague say when describing data movement, "Anything above zero is good; below zero, bad."
So how is our shopper feeling in the wake of this past holiday season? According to the Conference Board's consumer confidence index, the consumer reported two consecutive months of strong confidence: In December, the index posted 77.5 points (revised), and in January, the index stood at 80.7 points. The Conference Board's present situation index and its expectations index presented further evidence in January that the consumer is feeling a bit better. The present situation index rose to 79.1 from 75.3, and the expectations index rose to 81.8 from 79.0 points.
We'll check in with shoppers next after Valentine's Day, when we assess that holiday's sales. So where will Cupid's arrow land? We'll know sometime in March. Until then, happy shopping!
By Christine Viets, a Regional Economic Information Network analyst in the Jacksonville Branch of the Atlanta Fed
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Retailers Channeling Elvis
Popularized by Elvis Presley in 1957, Blue Christmas laments feelings of missing someone during the holiday season. It could be said that, based on preliminary results, brick-and-mortar retailers are channeling Elvis as they too are missing someone this holiday shopping season...the consumer.
Merchants are experiencing a shortened holiday shopping season with Thanksgiving falling later in the month of November. With six fewer shopping days, retailers approached this season with deeply discounted merchandise in an effort to attract foot traffic on Black Friday, the day after Thanksgiving and the traditional start to the holiday shopping season. Many stores even opted to open on Thanksgiving to entice consumers to shop. However, the efforts appear to have fallen short of expectations as shoppers have been very cautious with their spending this year. According to the National Retail Federation, shoppers spent 2.9 percent less during the Thanksgiving weekend this year versus last year. Additionally, both the Conference Board’s (CB) and the University of Michigan’s (UM) consumer surveys indicated consumer confidence with current conditions decreased in November, and future expectations were mixed (CB decreased; UM increased slightly).
But all is not lost. E-commerce appears to be emerging as the shining star in the retail industry. Even though retailers may feel like it “won’t be the same dear, if you’re not here with me,” the expectations for Cyber Monday, the Monday after Thanksgiving, to be the busiest online shopping day of the year seem to have been proven true. Last year “showrooming” (consumers visiting brick-and-mortar stores and comparing prices on their mobile devices) posed a huge concern; however, this year retailers appear to be embracing the online shopper. With all indications that the consumer has become more comfortable purchasing items online using their smartphones and tablets, retailers decided to enhance their mobile sites by offering huge discounts, free shipping, and customized shopping experiences in order to drive sales to their own online sites. November’s retail sales numbers seem to support this. Although overall sales were up, nonstore retail (online) posted the largest gain. Other evidence that online shopping is the wave of the future is that of a major shipping company indicating double-digit percentage increases, year over year, in the volume of items processed during the Thanksgiving weekend.
So, will retailers “be so blue just thinking about you” over the 2013 holiday season? Will they at least meet their sales expectation or experience some growth? Only time will tell as there are only a few shopping days left.
By Christine Viets, a Regional Economic Information Network analyst at the Atlanta Fed’s Jacksonville Branch
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Holiday sales cheer?
In October of this year, the National Retail Federation (NRF) released its 2009 holiday forecast, projecting a 1% decline in holiday retail sales, to $437.6 billion. The NRF said "While this number falls significantly below the ten-year average of 3.4 percent holiday season growth, the decline is not expected to be as dramatic as last year's 3.4 percent drop in holiday retail sales."
Similar sentiment was shared by retail associations and other retailers and experts in the region. For example, Georgia Retail Association president John Heavener said in a November 15 article in Macon.com that "We are hoping that if we can come in this year somewhere flat with last year, we will be thrilled."
The Florida Retail Federation (FRF) said that holiday sales in 2009 are expected to be better than 2008. Rick McAllister, president and CEO of the FRF, believes the retail industry will break even, which is better than 2008.
Kerry Gatlin, dean of the College of Business at the University of North Alabama, discussed the holiday shopping season in a Times Daily article in late November. He said that "From all indications, it's going to be a pretty good shopping season. This won't be a record-setting Christmas shopping season, but there's no reason to think it will be gloom and doom, either."
At a recent meeting with mall managers, we learned that many expect an increase in holiday sales compared to last year. There seemed to be a feeling that shoppers will "do Christmas right" since they have been cutting back and saving since the recession began.
The Atlanta Fed's most recent retail survey revealed that retail conditions are continuing to strengthen throughout the region. The majority of retailers that participated in the District's retail survey reported that activity was at or above their expected levels. Sales, traffic, satisfaction with inventory levels and expectations for the upcoming months continued to improve. Click here to see the full report.
Taken as a whole, these reports suggest that this holiday shopping season may indeed be a bit more cheerful than last year. We will continue to track retail activity in the region throughout December and will share our findings in future SouthPoint postings as well as in our Regional Economic Information Network reports on consumer spending.
By Michael Chriszt, an assistant vice president in the Atlanta Fed's research department
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