NRF: Holiday Sales Down 2.8% in 2008

New York City A December report released Wednesday by the National Retail Federation showed that retail industry sales for the month (which exclude automobiles, gas stations, and restaurants) declined 2.2% unadjusted over last year and decreased 1.4% seasonally adjusted from November.

November sales were revised down to a 3.4% decline unadjusted year-over-year from the original reported 2.2%.

As a result, initial 2008 holiday sales, which combine November and December sales, declined 2.8% to $447.5 billion, weaker than NRF’s projected 2.2% holiday forecast. Holiday sales in 2007 were $460.2 billion.

This represents the first decline in holiday sales since NRF started forecasting and tracking the numbers in 1995.

“The current economic crisis proved to be more challenging than any had anticipated,” said NRF chief economist Rosalind Wells. “Consumers showed they were more than willing to wait out retailers this year causing increased pressure on prices.”

Among the few positive tidings to report in December were health and personal care stores, where unadjusted sales grew a solid 7.6% year-over-year and 0.4% seasonally adjusted from November. Sporting goods, hobby, book and music stores were up 0.7% unadjusted from a year ago and down 0.4% from seasonally adjusted month-to-month.

Clothing and accessories were weak (down 9.4% seasonally adjusted year-over-year and 2.5% month-to-month seasonally unadjusted), as were furniture and home furnishings stores (down 11.9% seasonally adjusted year-over-year and 1.8% month-to-month seasonally unadjusted) and electronics and appliance stores (down 3.2% seasonally adjusted year-over-year and 1.0% month-to-month seasonally unadjusted).

The December decline was the sixth straight monthly decline. The December plunge in sales confirmed private-sector reports that retailers had suffered their worst holiday shopping season since at least 1969.

For the entire year, retail sales were down 0.1%, a sharp turnaround after a 4.1% gain in 2007. It was the first time the annual retail sales figure has fallen on government records going back to 1992. Before 2008, the weakest year for retail sales had been an increase of 2.4% in 2002, the year after the 2001 recession.

Another report from the Federal Reserve showed that the economy started the new year on weaker footing. Consumers cut back, hurting retail sales and forcing factories to cut production.

Analysts predict the current recession, already the longest in a quarter-century, will continue at least until the second half of this year.

In a separate report, the Commerce Dept. said businesses cut their inventories by 0.7% in November, the largest decline in seven years and the third straight month that stockpiles were reduced as companies scramble to cope with huge declines in sales. Total business sales fell by a record 5.1% in November, the government said.