WASHINGTON — The Commerce Department on Tuesday issued the government’s tally on retail sales in December, which confirmed the lackluster holiday season performance reported earlier by stores.
This story first appeared in the January 15, 2003 issue of WWD. Subscribe Today.
According to Commerce, department store sales fell 5.3 percent in December on a seasonally adjusted basis compared with the year before, as general merchandise sales inched up 2.8 percent for the period, and sales at apparel and accessory stores increased 2.9 percent.
When compared with November, sales at department stores were off 0.3 percent in December and increased 0.3 percent at general merchandise stores. Apparel and accessory store sales for the month rose 0.8 percent.
Overall, retail sales increased 1.2 percent for the month, largely driven by a 5 percent increase in auto sales, the only retail category, apart from restaurants and bars, posting a November-December increase of more than 1 percent. Restaurant and bar sales were up 1.1 percent for the period.
Economists cited various culprits for the anemic showing in December holiday retail sales.
“What it all comes down to is deflation,” said Carl Steidtmann, chief economist with Deloitte Research. “What you’re seeing are the effects of declining prices dampening top-line retail sales.”
Rosalind Wells, chief economist with the National Retail Federation, said in a statement: “Heavy promotions for 2002 meant that consumers were able to buy more goods for less money, thereby distorting the total value of sales in nominal terms.”
While also citing deflation as dampening sales performance, Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University, tied consumer jitters about a potential U.S.-led war with Iraq as causing a drop in retail spending.
Dhawan said the prospect of a war has also affected business decisions on new hiring, as reflected in part by the current unemployment rate of 6 percent.
“My feeling is, if the war lasts a month and it’s not too costly or too big and it’s a decisive victory, then consumer spending will be sustained and companies will start hiring again,” Dhawan said.
Steidtmann said consumers aren’t reacting to the specter of war now — however, that would change if war broke out.
“During the conduct of war, it will distract consumers from their day-to-day spending and have a dampening effect,” he said.