First Union: holiday sales to slow

Marvin Lazaro, November 27, 2000

CHARLOTTE, NC -Solid sales are expected again this holiday season, but First Union forecasts that sales growth will not reach the high rate of the last two years.

The financial services provider, based here, forecast nationwide gains of 7 percent for retailers, well below the 1998 and 1999 gains of 8.9 and 9.1 percent, respectively.

"Seven percent growth is still exceptionally strong," said Mark Vitner, economist for First Union.

The forecast is based on recent trends in retail sales, consumer confidence figures and surveys of holiday shopping expectations conducted by various mall associations, the National Retail Federation and major retailers.

Vitner attributed several factors contributing to the lower growth rate. The uncertainty surrounding the 2000 presidential election is proving to be a major distraction to consumers, while rising energy costs are also resulting in cuts in holiday spending budgets. The apparent weakness of the stock market is also playing a role.

Vitner, however, remains fairly positive about consumer spending.

"I am a little surprised with some of the more negative predictions that have been made this year," he said. "After all, the unemployment rate is at a 30-year low, inflation remains low, and consumer confidence remains near an all-time high. When all is said and done, consumers are still in a relatively upbeat mood."

The relatively early Thanksgiving, as well as Christmas falling on a Monday, will also work in retailers' favor this holiday season. Vitner forecasts plenty of promotions and deals by retailers to lure last-minute Christmas shoppers. What's more, Hanukkah begins on Dec. 21, two weeks later than last year.

Regionally, First Union forecast the Southeast and West Coast to post the largest gains, both with 8 percent, since both areas have had the strongest job and population growth. The Midwest was forecast to past a 7 percent gain, while the Northeast was predicted to post the lowest with 6.5 percent.

Vitner also expects several metropolitan areas throughout the country to have strong holiday sales. Atlanta (9 percent) and the Florida cities of Tampa, Orlando, Jacksonville (all three with 8 percent or better) and Miami, Fort Lauderdale and West Palm Beach, (7.5 percent) are expected to lead the nation, along with the North Carolina cities Charlotte (8 percent) and Raleigh (in the 9 percent range). Charleston, SC, and Northern Virginia are also expected to be hot spots, with 9 percent gains projected.

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