Lukewarm Holiday Spending

New Consumer Survey Shows Slower Growth Than in 2006

By Jim Woods and Paul Carton

He’s making a list, checking it twice, and he may pay a visit. But maybe not.

Santa may be stuck in the chimney this year, according to the latest ChangeWave Research consumer spending survey. The November survey of 3,872 ChangeWave Alliance members focused on spending and shopping patterns for the next 90 days – including a close-up look at spending for the holiday season.

For the third-consecutive survey, ChangeWave finds a slowdown in the projected consumer spending growth rate.

Only one-in-three respondents (32%) say they’ll spend more over the next 90 days compared to a year ago – down 4-percentage points from a previous survey in September.  Another 25% say they’ll spend less. 

Importantly, spending growth for the current holiday season looks notably weaker than a year ago (Nov 2006), when 36% said they’d spend more and only 19% less.

On a brighter note, the current season still looks far more optimistic than it did two years ago (Oct. 2005).

The downtick in spending growth for the holidays is showing up across all income levels, with the biggest change occurring among households earning less than $50,000 per year.

• Consumer electronics spending still looks relatively strong for the holidays, with 39% saying they’ll spend more. However a year ago, an astonishing 52% of respondents said they’d be spending more on consumer electronics for the holidays.

• Restaurant spending looks particularly hard hit this year, with just 19% of respondents set to spend more on eating out this holiday season – a net 16-pts worse than last year.

Why the Lack of Holiday Cheer?

Among those who told us they’d be spending less for the holidays, 29% say it’s due to higher energy costs – a 10-pt leap since September. Another three-in-ten (30%; up 4-pts) say inflation in general is having the biggest negative effect on their willingness to shop. Reduced income (24%; up 3-pts) is also having an impact.

Holiday Gift Shopping – Worse Than a Year Ago, But Still Better Than 2005

Respondents report they’ll be buying gifts for less people this holiday season than they did a year ago. But despite the slowdown, respondents still plan on buying gifts for more people than they did in 2005.

We also asked Alliance members about their overall spending on holiday shopping, and again the same pattern emerges. The spending growth rate will be less than a year ago, but still better than it was in 2005.

And despite the overall downtick, there will still be key winners this holiday season.

Consumer Electronics – Canon Blows Away the Competition

For the second year in a row, digital cameras (23%) top our respondents’ holiday wish lists – although the outlook for cameras is down somewhat (minus 4-pts) compared to a year ago.  Canon (CAJ) looks particularly robust, maintaining a huge lead in the digital camera marketplace going into the holidays:

• Canon (55%) has more than double the market share of its next closest competitor Nikon, having posted an extraordinary 21-pt gain since the previous holiday season.

• Other winning items for the holidays include LCD TVs (18%), digital picture frames (11%), and high-definition DVD players (8%).

• Costco (COST; 11% more gift shopping money, 5% less) has the most gift shopping momentum of any of the retail outlets in this survey, while Bed, Bath & Beyond (BBBY; 3% more, 11% less) and Sears (SHLD; 3% more, 11% less) appear set to have the weakest holiday seasons of the stores examined.

• Best Buy (BBY) continues to dominate in terms of home entertainment. Going forward it’s the momentum leader for the holiday season – with one-in-two (51%; up 7-pts) saying they’ll shop there over the next 90 days. Costco (23%; up 2-pts) and Amazon (AMZN) (19%; up 4-pts) also show momentum going forward.

So, in a nutshell, Santa is finicky and holiday spending will be more lethargic than it was a year ago. However, a word of caution for potential doomsayers out there – the overall spending environment is still more upbeat than it was just two years ago.

Paul Carton is Executive Director of the ChangeWave Alliance. Jim Woods is ChangeWave's Senior Editor. The Alliance is a network of 13,000 highly qualified business, technology and medical professionals in leading companies of select industries. The Alliance is surveyed weekly on a wide range of business and investment research and intelligence topics.