Wednesday, September 30, 2009
Consumer confidence dip is bad holiday omen
A key measure of consumer confidence fell in September, after a gain in the previous month, raising concerns about retail sales in the upcoming holiday season. Because of fears about the short-term economic outlook, people are spending less and as a result, economists are concerned that this frugalness will carry over into the very important holiday season for retail sales. Part of the false hopes for a continuing rise in consumer confidence was the increase in spending last month, but that was a result of the Cash for Clunkers program. However, the success of the program proved that consumers will respond to incentives so perhaps retailers will focus on finding new ways to attract consumers.
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This article is unfortunate to read. I'm sure most people were hoping that because several indicators show that "the worst is over" that this holiday season might make up for some of the severely lessened spending throughout the rest of the year. This shows how important consumer confidence really is when it comes to demand. Without a definitive increase in it, it doesn't seem like much will change.
Just when we thought our economy was making a positive upward trend, reports come out saying consumer confidence is low. Looks like this recovery will take longer than expected. This does not bode well for retailers when half of their annual profit comes during the holiday season. Only time will tell when we actually see a defining point when this recession will actually end.
A very interesting article, however is somewhat unfrotunate and gives us the grim realization that aside from the growth that the country experienced last month due to Clash for Clunkers, consumer confidence is actually low currently in September. This is not great news for consumers, as well as retailers because they are not in the best position at the time. Even though consumers reacted positively with the Cash for Clunkers program, retailers might not be able to offer similar incentives to people to get them to go out and spend, which is a major problem especially with the holiday season just a few months away.
It is discouraging to read this article after hearing so much positive news about the economy. While it is discouraging I think that results will be mixed for the remainder of the year. Consumers are more likely to spend their money on necessities first and holiday spending will likely to be one of the last things that will rebound.
Retailers will adapt and come up with campaigns and incentives for consumers to spend this holiday season. It is a part of our culture to spend over the holidays, and though this article suggests a concern, I don't think we will see a huge decline in holiday sales. If I am a retail company I would be utilizing any and all promotional campaigns to aid in sales. The trick is funding the promotions, because if sales are not what they expect, margins are cut even further.
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