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Consumers to Cut Back on Holiday Spending

About one-quarter of consumers surveyed by retail researcher NPD Group say they plan to spend less this holiday season than during last year's holiday.

In the 2007 survey, 18% of consumers said they planned to spend less than the previous year — that proportion has shot up to 26% in the latest survey, NPD reported.

Only 11% — the same fraction as last year — said they plan to spend more this holiday.

"For the first time I am predicting flat to declining sales for the holiday season," said Marshal Cohen, chief industry analyst. "With consumers already saying they plan to spend less, stores with lean inventories, those inventories on sale as soon as they hit the floor, and tightening credit both for businesses and consumers, where can growth come from?"

Taking note of consumers' stated need to hold steady or reduce their level of credit card spending, Cohen added, "I think many will refrain from purchasing an indulgence or splurge gift, and for the first time in years, may actually cut people from their shopping lists."

With no clear "must have" gift this holiday, look for promotions to be the biggest motivator, said NPD, which reported that 60% of consumers surveyed "say that either a 'special sale price' or 'overall value for the price' will influence where they shop this holiday."

Cohen predicted gift cards will fare well. He said, "And don't forget those post-holiday promotions. The markdowns could almost double the value of a gift card."

U.S. Consumers' Spending Intentions
2008 vs. 2007

2008 2007
Source: The NPD Group, Inc. / Annual Holiday Survey
Plan to Spend More 11% 11%
Plan to Spend About The Same 63% 70%
Plan to Spend Less 26% 18%


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