If consumer spending doesn't pick up later this year, a key retail sales forecast for the Christmas holidays may miss the mark, according to Dennis Jacobe, the chief economist at polling group Gallup.
Year-over-year consumer spending in 2009 is running consistently below last year's monthly spending for all income levels, Jacobe said in a report on Thursday, citing Gallup's consumer spending data. Earlier this week, the National Retail Federation reported that it expects a 1 percent decline in holiday sales in 2009. Holiday sales in 2008 were down 3.4 percent compared to 2007.
This gap in year-over-year spending will need to begin closing rapidly as last year's comparables become easier to match, or the NRF forecast for 2009 holiday sales may end up being optimistic, Jacob wrote in a Gallup report interpreting the firm's latest consumer spending and confidence report.
Jacobe notes that Gallup data has shown a sharp improvement in consumer confidence. Despite improved sentiment among consumers however, this may not lead to greater spending.
While some have been skeptical of the widely assumed relationship between confidence and spending, Gallup Daily data confirm that this relationship has been effectively decoupled throughout 2009, Jacobe says.
Data suggests that there exists a new normal for consumer spending, especially with spending remaining flat among upper-income consumers, Jacobe notes. Daily discretionary consumer spending is down 30 percent in September across income levels, he adds, referring to Gallup data.
Among other things to watch for in anticipating consumer spending for the holidays will be if job creation begins, particularly new hiring, and falling consumer credit, he notes.
September consumer indices, poll
Jacobe's comments come after his interpretation of the latest Gallup confidence index and spending poll.
U.S. consumer confidence was rising in September, reaching its highest level in 2009 while spending was nearly flat during the month, according to the latest Gallup poll.
Gallup's key economic measures thus continue to confirm that confidence is decoupled from spending and that a new normal for spending has been established, Jacobe said.
Gallup's Consumer Confidence Index was up two points from August to -23 in September. However self-reported average daily spending was up $1 in September to $66.
Looking at job creation, Gallup's Job Creation Index in September showed its third monthly improvement in a row.
Although reduced layoffs have helped moderate job losses over the past five months, it will take an increase in hiring to produce a significant improvement in job creation and the U.S. unemployment rate, Jacobe notes.