Shocked and appalled—that was the reaction to the shopping-season debacle unfolding in the US. It was triggered by MasterCard’s SpendingPulse report that poured ice-cold water on expectations of a 3% sales growth. But now there’s a new term to describe “consumer spending,” “consumer debt,” and ultimately “trade deficits” when they occur as a function of such uplifting concepts as “holiday season” or “Christmas” whose magic is boiled down to just one issue: how much did everyone spend?
Who came up with it? Retailer par excellence, Michel-Edouard Leclerc, CEO of E.Leclerc, France’s largest retailer with a market share of 18%. He faced a challenging environment as unemployment soared above 10% and as the already anemic private sector plunged into a crisis. Yet “Christmas was saved,” he said today, by “the festive spirit.”
The “rush during the last three days” made up for weakness during the prior weeks and brought E.Leclerc’s sales up to expectation. He outlined the phenomenon of the “festive spirit”—that drive to separate yourself from your hard-earned money, and if you don’t have any, from borrowed money—in more scientific detail: “The deeper we go into the crisis,” he said, “the more there are moments like these, when people tell themselves, ‘Sh-t, let yourself go.’”
But in the US, that festive spirit was apparently lacking. During the eight weeks before Christmas, according to MasterCard’s SpendingPulse report, consumers only spent 0.7% more than during the same period last year, the worst showing since 2008. Despite some help from the calendar: there was one more weekend between Thanksgiving and Christmas this year. When inflation is taken into account—CPI rose 1.8% in November over prior year—sales actually dropped.
So, it’s an estimate. Data gleaned from MasterCard payments were extrapolated to all payment forms—including a wad of wrinkled twenties I pulled out of my pocket to pay for dinner—and to all consumer products, from flowers to pickup trucks.
“It’s a lost season,” said SpendingPulse VP Michael McNamara. The festive spirit was even lacking online, which disappointed with an 8.4% increase, rather than the double-digit increases we’ve become accustomed to. Many Retailers tried to salvage the season at the last minute through heavy discounting, with mixed results. More discounting is expected to clear out the inventory, and to wrest that money by hook or crook away from the harried and strung-out consumer.
Blamed was Sandy: in the Mid-Atlantic region, sales dropped 3.9%. And the Fiscal Cliff—a veiled threat at Congress and the White House that reducing budget deficits in any meaningful way now, rather than kicking the can a decade down the road, will wreak havoc on the economy.
To get a handle on the Fiscal Cliff’s impact on the festive spirit, I’ve been doing my own mini survey. Of course, there were those respondents who watched the theatrics and fretted about every twist and turn. But quite a few people reacted similarly to the guy who cuts my hair—a small-business owner, hard-working, in his forties. He confused the Fiscal Cliff with the “Mayan” apocalypse and wasn’t worried about either one of them. He did lament that he was spending too much money on clothes and that he tried to sell some of his $400-jeans but could only get $20 to $40 a pair, if he was lucky. And he groused about the so-so month he was having. Those were his worries. Not the Fiscal Cliff.
But there are real issues that impact the festive spirit. For example, the 46.2 million people who are on food stamps, up from 30 million in 2008. Or the millions of people who are either unemployed or have dropped out of the work force and no longer count as unemployed. The Employment-Population ratio, which has been wobbling near its multi-decade low, confirms that barely enough jobs have been created since 2009 to keep up with the growth of the working-age population.
Nevertheless, we cling desperately to glimmers of hope: among them, weekly chain store sales. After two utterly morose weeks in early December (-0.7% and -3.1%), sales rose 0.7% for the week through December 22 and 4.3% during the prior week. The festive spirit at the last minute. But even the festive spirit may have trouble overcoming the constraints of reality.