Real Holiday Spending Was Negative in 2007

The Retail Sales post-mortem has begun, and it is as we expected: the weakest holiday spending season in five years.

Total sales gains from Thanksgiving to Christmas Eve were a nominal gain of 3.6%, according to data gathered by MasterCard’s SpendingPulse. Taking apart that data, we find that Real sales showed an actual 0.0% gain — or worse — over 2006 levels.

This weakness was despite the advantages the 2007 calendar gave Retailers over 2006: Thanksgiving fell on November 30th 23rd last year (versus November 22 ’07), and Christmas Eve was Sunday evening (versus Monday ’07). The calendar gifted stores with an extra 8 single day of holiday shopping. Plus, retailers even gained part of the final weekend (~about a third) over last year’s inconvenient Sunday Xmas Eve.

Note: This sales data also includes Food & Energy. The 3.6% is before we make adjustments for inflation. The specifics of MasterCard’s data includes purchases made by more than 300 million MasterCard debit and credit
card users; it covers not just store purchases, internet buys and gift cards: It also includes gasoline and meals at restaurants, both of which had seen significant price increases this year.

Excluding just the gas purchases alone, and holiday sales rose a lackluster 2.4%. If we back out supermarkets, other food plus restaurants (and their price increases), then (my ballpark estimate) sales rose approximately ~2% — or a bit below the core rate of inflation. In other words, Real Sales may have reflected an actual loss over last year. This was despite the longer holiday shopping season.

What did sell? Well, lots and lots of marked down merchandise. This is likely to pressure retailers’ margins in the coming  earnings season. 

Here’s the breakdown:

Online spending was $26.3 billion — a 22.4% gain

Apparel rose 1.4% from a year ago;

    -Men’s clothing climbed 2.3% 

    -Clothes for women fell

Footwear sales increased 6%

Luxury goods, excluding jewelry, rose 7.1% (ex-jewelery, -1.9%)

That last data point is quite intriguing: If we include jewelry, the luxury
category declined 1.9%. I wonder whether this is primarily due to aspirational luxury shoppers (i.e., middle and upper middle class) pulling back, or some reduced spending by the wealthy. Regardless, it is rather unusual.

Finally, gift cards continue to push some sales from December to January. In the 2006 holiday season,  January sales made up
of the three-month period’s total, up from 23.6% in the 2000-01.


For those of you who still have some shopping left in you, I have some good news: Many retailers, from the high-end to the low, will start slashing prices this morning. Open up any paper, and you wills ee full page ads from most of the major retailers:

Kohl’s is 60 to 70% percent discounts
Macy’s is
50 to 70% (Plus a $10 coupon for
purchases of $25 or more)
Bloomingdales 30-75% off (over 5 full pages in NYT A section)
Fifth Avenue from 8 a.m. to noon, clothing will be 50% off 
Lord & Taylor 50-75% reductions
Brooks Brothers 40% off
Toys “R” Us is offering a
buy-one-get-one-half-off promotion

The bad news? Americans are increasingly falling behind on their credit card payments. Credit card delinquencies and defaults are surging by
"double-digit percentages" according to an Associated Press analysis of financial data from the country’s
largest card issuers.

We will soon need PSAs like those that Beer & Alcohol companies issue: "If you must shop, then shop  responsibly . . ."





Unpaid credit cards bedevil Americans
Americans’ see their debt woes expand as unpaid credit card bills are on rise
Associated Press, Dec 24, 2007

Retail Rush Falls Short, Now Come More Sales
WSJ, December 26, 2007; Page B1

Weekend Shopping Surge Fails to Salvage U.S. Holiday Sales
Joseph Galante 
Bloomberg, December 26, 2007

Holiday Spending Is Weak, as Retailers Expected   
NYT, December 26, 2007   

Prices slashed for shopping blitz
NY Daily News, Wednesday, December 26th 2007, 4:00 AM

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What's been said:

Discussions found on the web:
  1. OkieLawyer commented on Dec 26

    Regarding the credit card defaults, I saw this coming a long time ago. (To be fair, many — if not most — of the readers here did as well.)

    The chickens of overconsumption of coming home to roost.

    My former colleagues in the bankruptcy practice sent me an e-mail saying that the bankruptcy business is booming in Oklahoma City (and this is normally the slow season).

    It’s like watching a slow motion train wreck play out before your eyes.

  2. Michael commented on Dec 26



    BR: Too much eggnog! I’ll fix above.

  3. MikeinMT commented on Dec 26

    Barry – I agree that inflation adjusted holiday sales appear to have been much weaker this year. However, I’m pretty sure that last year Thanskgiving was on the Nov. 23, not the 30th. So we gained 1 calendar day (plus the latter half of Sunday, as you point out).

    Thanksgiving is always the 4th Thursday in Nov., so this shopping season was the longest possible. Next year’s will be 5 days shorter. That all said, aren’t we all gonna buy what we buy whether we have 32 days or 3?

    Enjoy the short week!


    BR: More eggnog — I’ll fix above.

    (Damn! 2 in one post!)

  4. Fred commented on Dec 26

    Starting the Christmas shopping season at Thanksgiving is so old school. Where I live, the stores put up Christmas decorations November 1st.

  5. Winston Munn commented on Dec 26

    A Goldilocks anti-recession recap:

    Subprime is contained.
    Cap-ex will save us.
    Subrpime has not affected the real economy.
    Consumer spending is holding up.

    Four down, one to go:

    Job creation is positive.

  6. Michelle Leder commented on Dec 26

    Before reading the AP article, I didn’t even realize that credit cards were filing such detailed documents with the SEC. Here’s a link to the filing by the BofA trust mentioned in the article. Pretty shocking!

  7. commented on Dec 26

    Jingle Bell: 12.26.07

    Berkshire to Pay $4.5 Billion for Pritzkers’ Marmon (Bloomberg) WaBu’s Berkshire Hathaway will spend $4.5 billion for a 60 percent stake in privately-held Marmon, a Pritzker-family held diversified services firm, whose businesses include hotels and ra…

  8. dblwyo commented on Dec 26

    BR – thanks for the holiday cheer. Have some more eggnog. Goldilocks appears to have left the building. In fact Cinderella’s party appears to be at the clean-up the mess stage. Have a lot more eggnog.
    Just to share a couple of other early warning indicators (following Kariel’s excellent work)try these on the sudden decline the monetary base, the negative yield curve and the spiking in short-term basis point differentials indicating continued seizing up of the credit markets.
    Xmas Cheer – More Early Warnings ?:
    Happy holidays all ? Sigh.

  9. Eric Davis commented on Dec 26

    I woke up and saw the MasterCard numbers and said….. “BR, is going to post that it’s negative.”……

    I wonder if I can trade BR futures

    I was looking at the yearly christmas numbers and was wondering if I could see a “Real inflation” number in them… Came up with 6% as a median, based on limited to no segnificant statistical analisis(I just didn’t want to belie how much energy I put into it)…
    this year certainly is higher…..

  10. Toro commented on Dec 26

    Excellent work, Barry.

  11. blam commented on Dec 26

    Can’t we just import Chinese consumers….

    The deflation bogey man dead ahead…. the true value of the platform corporation, the dominance of the financial sector, and financial leverage revealed (again).

    How fun.

  12. halbhh commented on Dec 26

    In the past, there was often a note that gift cards were not included in sales numbers, but this time I don’t see that info yet.

    Average consumers can anticipate sales of course. So as they do (as we did in my house), then they plan to take advantage, etc. That’s only elementary really. Perhaps the increasing gift cards are aimed in part at exactly this.

    To get the overall picture, we’ll have to have total sales from Nov-Jan, including on-line.

    Of course, by then a lot of water will have passed the bridge on the way to the sea.

    So far as the guessing goes, it seems about what some of us expected: roughly flat (within 1%) in real terms. I was expecting that recently, but back in Oct I was expecting a significant decline in sales.

    Compared to my expectations of Oct, this is quite encouraging regarding the “soft landing” (for the general economy).

    House prices of course are a different question (think slow motion bridge collapse etc).

  13. VJ commented on Dec 26

    When NBC News reported on the Mastercard snapshot of retail sales only growing at 2.4%, they added that “a lot of the money that was being spent was on gasoline“.

  14. The Theroxylandr in Flame commented on Dec 26

    The fundamental price ofgold

    Im sure I will provoke a violent negative reaction but I will say two things about the price of gold:

    Gold is not investment, it is a pure speculation
    The fundamental price of gold is unchanged in the last 2000 years

    I.e. if you had some ances…

  15. VJ commented on Dec 26


    A Goldilocks anti-recession recap:

    Subprime is contained.
    Cap-ex will save us.
    Subrpime has not affected the real economy.
    Consumer spending is holding up.

    They did the same with Christmas spending.

    First, Black Friday’s spending was GREAT, then it wasn’t, and they said, well, the Saturday before Christmas is the new big shopping day, so we have to WAIT.

    Then, when the spending on the Saturday before Christmas, as well as the entire weekend, was horrible, they said, well, with Christmas on a Tuesday, a lot of people will have Monday off, so we have to WAIT.

    Now, the line is that gift cards are deferring the good news until January, so we have to WAIT.

    Move along folks, nothing to see. Just keep shopping.

  16. Aaron commented on Dec 26

    5 pages in the NY Times? Wow, hope that isn’t a sign of just how horrible things are going in retail. It will be interesting to see how the employment numbers do in coming months.

  17. Katrina commented on Dec 27

    This year has been bad for many retail business owners. My mother has her own little shop. She is barely making it this year. People just aren’t buying as much.

  18. Jerry commented on Jan 4

    I’m certainly not an economist but I always wonder about those trends. I think they’re a good thing (not for retailers, of course). Are people saving more? Do they have the discretionary income in the first place? Who wants to cash in an annuity to just get through the holidays? I hope the trends leads to more saving on the part of consumers.


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