The Grinch that could steal Christmas for retailers this year will be higher energy prices — gas and home heating oil. With three months until the end of the holiday season, the National Retail Federation predicted that holiday sales will increase 5 percent, less than last year's 6.7 percent gain.
“I think gas prices will have more of an effect this year,” says Pam Goodfellow, an analyst for BIGresearch, a Columbus, Ohio, consumer research firm. “They are at the highest levels they have ever been,” says Goodfellow. “When gas prices hit $3 a gallon again, it might make people think more about where they are driving.”
Britt Beemer, president of America's Research Group, says he thinks holiday sales might actually show a decline from 2004 — for the first time in 20 years. Historically Labor Day sales, which were down about 6 percent this year, have been a bellweather for holiday sales.
Even less pessimistic forecasts show that customers are being a little tighter with their budgets this year. BIGresearch estimates that about 34.7 percent of consumers plan to spend less on gifts this year than they did last year because of higher gas prices, compared with 27.9 percent in 2004. The average retail price for regular gasoline was $2.95 in late September, an increase of $1.10 since last year, according to the U.S. Department of Energy.
Despite higher gas prices, retail sales have increased about 6 to 7 percent so far this year, largely driven by affluent customers, says Jay McIntosh, director of retail and consumer products for Ernst & Young. However, other factors, such as Hurricane Katrina, may hurt holiday shopping. “Some people may feel it's wrong to spend frivolously,” says McIntosh.