November spending slows, consumers may be waiting for better deals

First Data Corporation, a large electronic payments processing company, reports softer spending patterns among consumers so far this holiday season. The report released Wednesday (Dec. 11) found overall retail spending in November rose 1.3% from a year ago, but slid backwards from the 5.6% spending uptick in October.

November dollar volume growth of 4.4% marked a downtick from October’s growth of 6.8%. Although the cold and dry weather at the end of the month offered perfect holiday shopping climate, several portions of the country earlier in the month dealt with blasts of snow hindering shopper foot traffic. Transaction growth slipped in November to 4.8% compared to last month’s growth of 6.2%.

Retailers have pulled out all the stops to get consumers into their stores and sweetened the enticements to spur online shopping as well, offering free home delivery and Sunday delivery in some areas. First Data notes that spending growth was strong at 9% on Thanksgiving Thursday and Black Friday. Given there are fewer shopping days this year between Thanksgiving and Christmas, retailers took no chances and began offering deals early.

However, First Data found that retail spending growth cooled in November in spite of strong Black Friday turnout. Average ticket growth was down 0.3% in the month as retailers offered price discounts and gasoline price deflation took those receipts lower. One area that reported robust growth last month was travel and hotel merchants who cited 9% and 6.4% respective increases in receipts thanks to more consumers traveling for Thanksgiving.

“Although spending growth increased on a year-over-year basis, the growth slowed on a sequential basis as consumers were more modest in their purchases throughout the month as they prepared for the holiday shopping season,” said Krish Mantripragada, senior vice president for Information and Analytics Solutions at First Data. “We definitely see that consumers are more confident and have enjoyed stronger income growth in 2013 compared to 2012. This should encourage shoppers to open up their wallets as the holiday season progresses.”

Economists believe consumers are willing to hold out for the absolute best deals, which is why retailers like Wal-Mart and Best Buy have guaranteed shoppers the lowest price and will refund the difference in a gift card if the item can be bought cheaper in the next couple of weeks ahead of Christmas.

First Data reports that shoppers pulled back on retail spending for most of the month in anticipation of holiday deals at the end of November and they may continue to hold out for what they perceive as rock-bottom pricing.

Another report by IBIS World, a marketing research firm, expects consumer spending will end up 3.4% ahead of the 2012 holiday totals to a projected $68.9 billion. The report notes the government shutdown, sluggish income growth and sustained unemployment as the main threats to retailers reaching their sales goals this year. At the same time lower gasoline prices are helping to put a little more money in some pockets and a pullback in SNAP benefits is also being felt among lower income families.

IBIS World research expects gift expenses to generate $53.5 billion in sales, up 3.1% from a year ago, but note that fewer people will benefit. 
The trend this year is to shrink the circle as consumers pare down their list to a smaller group of friends and family, the firm predicts.


Two of the biggest gift giving categories are expected to be electronics (6.6% growth), driven by releases of new games and gadgets and jewelry expected to rise 7% from a year ago.
 Clothing and other apparel spending is expected to decline year-over-year, according to the report.


"Many consumers are opting for gatherings with close family and friends, particularly over food and drinks, instead of exchanging gifts with an extensive network," noted the company in a report.

About 111.7 million U.S. households will celebrate the holiday season this December, spending 3.9% more on average for a celebratory dinner than they did in 2012, IBIS World predicts. The firm also expects the holiday decoration segment to under perform the average holiday spending, growing only 2.9% from 2012 to less than $6 billion.

"Tight budgets and weak economic confidence are encouraging consumers to reuse decorations from previous years or make some themselves instead of buying new decorations," the report notes.