At the national level, early holiday retail sales are giving mixed signals about what to expect this year. According to the National Retail Federation, Black Friday weekend sales across the nation were up 21.9 percent from 2004. The Black Friday weekend is the Friday, Saturday, and Sunday following Thanksgiving. The term Black Friday refers to the first time of the year many retailers begin earning a profit.
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In either case, both groups agree Black Friday sales are not the best indicator of the level of sales for the remainder of the holiday shopping season. The NRF predicts an overall 6 percent increase in holiday sales this shopping season compared to last year.
Locally, we can expect varied performance of the retail sectors of the county's seven cities. At the county level, the retail sector in 2005 has performed strongly, with sales from January through August up 5.2 percent from the same period in 2004. Retail sales were up in five of the county's seven cities, with only Tombstone and Willcox seeing a drop in sales. From January through August of this year, retail sales were up 6.7 percent in Benson, 10.2 percent in Bisbee, 9.3 percent in Douglas, 14.2 percent in Huachuca City, and 5 percent in Sierra Vista. Retail sales were down 0.4 percent in Tombstone and 12.4 percent in Willcox.
However, while retail sales for the first eight months of the year give us some indication of the direction of local spending patterns, they are not necessarily the best predictors of holiday retail sales (those sales occurring in November and December). In 2004, holiday sales varied somewhat from the trends seen in the first eight months of the year.
Only in Sierra Vista were sales data for January through August 2004 an accurate predictor of 2004 holiday retail sales. Retail sales during this period were up 11 percent, followed by an 11.9 percent increase in holiday sales. Based on historical patterns and analysis of this year's retail sales, the Cochise College Center for Economic Research predicts this year's holiday retail sales in Sierra Vista will be up 5 percent from last year.
In Tombstone in 2004, retail sales were down 0.2 percent in the January through August comparisons, while subsequent holiday sales were down 2.3 percent. Tombstone holiday retail sales, however, are not as dependent upon traditional holiday gift shopping, as they are on retail spending related to the city's tourism industry. Based on an analysis of a variety of factors, the CER predicts 2005 holiday sales in Tombstone will be down 2.5 percent from 2004 levels.
In Benson last year, retail sales were up 0.1 percent in the January through August comparisons, while holiday sales were up 10.9 percent. Based on the strong performance of Benson's retail sector in 2005, which grew by 6.7 percent in the first eight months of the year, the CER predicts 2005 holiday sales in Benson will be up 12.5 percent from last year.
Like Tombstone, Bisbee's holiday sales are also strongly tied to retail spending related to the city's tourism industry. In Bisbee in 2004, retail sales were down 3.1 percent in the January through August comparisons, while subsequent holiday sales were up 11.6 percent. Retail spending in Bisbee from June through August of last year, however, helps shed light on holiday spending patterns seen later in the year. From June through August 2004, retail sales in Bisbee were up 8.5 percent, followed by the 11.6 percent increase in holiday sales. Based on analysis of the trend in this year's retail sales, which increased 10.2 percent from January through August and 1.6 percent from June through August, the CER predicts 2005 holiday sales in Bisbee will be up 5 percent from last year.
In Douglas in 2004, retail sales were up 2 percent in the January through August comparisons, while follow-on holiday sales were up 19 percent. It is important to note, however, that the Wal-Mart Supercenter in Douglas opened in late October of last year, fueling holiday sales in that city. Based on the analysis of a mix of factors, the CER predicts 2005 holiday sales in Douglas will be up 15 percent from 2004 levels.
In Huachuca City last year, retail sales were up 38 percent in the January through August comparisons, while subsequent holiday sales were up 16.5 percent. As with Bisbee, however, retail spending patterns from June through August of last year shed further light on holiday shopping patterns, with June through August sales down 7.7 percent. Declining retail performance in these latter months helps explain much of the deviation of holiday shopping patterns from those seen earlier in the year. Based on analysis of this year's retail sales, the CER predicts holiday retail sales in Huachuca City will be up 15 percent from 2004 levels.
Holiday retail sales in Willcox were the most difficult to forecast, with little evidence offered from last year's holiday shopping season. In 2004, retail sales were down 0.9 percent from January through August, but up 8.2 percent from June through August. Despite this recovery in the latter months, holiday sales in Willcox for 2004 were down 26.8 percent. Based on the sluggish performance of Willcox's retail sector in the first eight months of 2005, which saw sales drop by 12.4 percent, the CER predicts another slow year for holiday sales in Willcox, with sales down by as much as 20 percent.
There are numerous factors that will influence this year's holiday retail sales. Inflationary pressures nationwide caused by the recent Gulf Coast storms, as well as higher energy prices resulting from the increased demand for oil worldwide, along with storm-related supply disruptions, have been a looming threat to the vitality of this year's holiday shopping season. Moreover, higher interest rates spurred by a tightening of monetary policy at the national level also threaten to slow local sales in the near term.
Higher energy prices mean families will have less money left over to spend on other things. Holiday shopping is an easy target to help bring the family budget into balance in the wake of higher prices. Recent increases in fuel prices also raise the cost of transporting retail goods across the nation, thus contributing to higher prices for these goods. Gas prices, however, have receded from all-time highs in recent weeks. If this trend continues, this will help holiday sales.
Rising interest rates threaten to discourage consumer borrowing. Moreover, higher rates increase the cost of previously incurred, variable-rate consumer debt, leaving many families with less money for this year's holiday retail purchases. Many retailers have offered large discounts to attract customers and fend off the effects of tighter monetary policy and inflationary pressures.
With the tightening of family budgets across the county, we can expect to see a shift in demand from normal or superior goods to what economists refer to as inferior goods. Inferior goods are those lower-priced alternatives consumers switch to in times when budgets are tight. For the holiday shopping season we should expect the demand for higher-priced, famous-maker brand items to decline, while the demand for lower-priced alternatives increases. Along with this, we should expect to see a shift in demand from upper-scale specialty shops to discount retailers as consumers seek to stretch their holiday shopping dollars.
If you have any questions on the local economy, please contact the CER at 515-5486 or email us at cer@cochise.edu. Check out the Center's website at www.cochise.edu/deptsdirs/organizations/cer.
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