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U.S. retailers are expected to experience the weakest holiday season since the recession of 1991, senior economists from the Retail Intelligence System (RIS) of PricewaterhouseCoopers forecast. Core retail sales, which exclude the automobile and gasoline channels, are forecast to grow 1.5 percent for the fourth quarter holiday season, which is significantly lower than last year's 4.5 percent year-over-year growth during the holiday period.
According to RIS economists, holiday sales growth in core retail channels will be hurt by the recent national tragedies, falling prices, and weaker demand from consumers who are turning more cautious in the wake of layoffs and a weakening job market. The impact of retail prices, which have been falling at about a one-percent annual rate in recent months, is being magnified by high inventories in some retail channels and a super-competitive retail environment in the face of softening consumer demand. This price deflation - a stark contrast to the 3 percent retail price inflation during the recession of 1991 - will mean great buys for consumers, but will dampen sales growth and profits for retailers.
Outside of online sales, the RIS economists expect that apparel retailers should fare the worst as they face comparisons to relatively strong apparel demand a year ago, receding consumer demand for apparel this year - particularly for readily deferrable, discretionary purchases - and downward price pressure as they struggle to keep inventories down.
Retailers that sell home goods - such as home improvement stores, furniture stores and consumer electronics stores - should see sales growth hold steady or improve as they benefit from persisting strength in the housing market.
Sales growth at discount retailers should be cushioned as more shoppers turning to them for value prices in response to the challenging economic environment. Supermarkets should also see the softening in their sales cushioned as consumers curb their spending at restaurants.