Newswise — Retailers are dreaming of a green Christmas, and it looks like their dreams may come true, according to a Florida State University economist.
But they shouldn't get too excited, said Professor James Gwartney, who forecasts good but not great holiday sales for most retailers. Gwartney holds the Gus A. Stavros Eminent Scholar Chair and is director of the Stavros Center for the Advancement of Free Enterprise and Economic Education at FSU.
"I would expect it to be above average, but not a record-breaker," Gwartney said of the shopping season. The economy is still strong after three years of expansion, but high gas prices and a horrific hurricane season are dampening holiday spirits.
"People across the nation are spending more at the pumps, and some people who might normally be flush with funds have had unexpected expenses or reductions in income because of the hurricanes," Gwartney said. Hurricanes Dennis, Katrina, Rita and Wilma have consumed about 10 percent of the nation's disposable income, he said, including contributions that people sent to the many relief efforts.
"A lot of Americans have substantially opened their wallets, and that may be limiting their purchasing power for things like Christmas gifts," he said. "A lot of people really made sacrificial gifts."
Still, consumer confidence is solid, which is good news for the 30 percent of retailers - such as jewelry and toy stores - that depend on holiday sales to determine profitability of the whole year. With this kind of cautious optimism on the part of the retailers, consumers probably won't see many special offers and deep discounts this year.
Whether Christmas turns out to be the most wonderful time of the year for retailers may signal the direction the economy will turn in 2006, Gwartney said.
"It's usually reflective of the state of the economy," he said. "If people are not confident enough to spend now, things are not going to be good six months down the road, either. Strong Christmas sales are usually a good omen."
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