Strong Consumer Spending Credited With Return of Buoyant Retail Volumes

With a steady year-over-year recovery and a buoyant 2004, retailers are optimistic about prospects for the holiday season and well into the New Year. American Express says it has seen retail billings overtake travel and entertainment as the largest spend category on its Consumer Cards. This year retail billings have increased over 10% due to increased consumer charges and growth in merchant coverage. Statistics Canada also released figures early this week showing an increase in retail sales since the beginning of 2004. In line with this sentiment is Amexs annual survey of Canadas top retailers, who say theyve seen an average sales growth of 11.6% for the year-to-date. They point to a more bullish economy, increased consumer confidence and an influx of hot new consumer products as helping to fuel demand, with over half predicting a better or somewhat better holiday season and almost eight in ten (77%) expecting the trend to continue well into 2005. A large majority (76%) agree that business has improved steadily over the past three years. Almost half say spending levels have fully recovered and a quarter say business has surpassed the peak levels seen prior to 2001. On average, retailers are looking for an increase in holiday sales of 12.4%, with only a small handful (6%) seeing any prospect of a decrease and with well over one-third (35%) believing they could see at least 11% or more. This sentiment is in sharp contrast to the last couple of years, which saw the retail industry approaching the holiday season with a high-degree of caution. While holiday shopping can account for 20% of annual sales, the economic uncertainty and consumer pessimism of the last few years have led retailers to scale back expectations and adopt a more subdued approach to their preparations. In fact, she says that 70% plan to hire either more seasonal or part-time workers than they did last year, with 52% making sure to have more merchandise on hand. The annual survey was conducted among Canadas top retailers with annual sales in excess of $5 million, and the mood of optimism was consistent across the different categories of merchants. Key Findings - Of the retailers who believe sales have increased, half say there has been increase of at least 8% or more - A quarter of those pegging their increase at 11% or better compared to 2003. - Retailers pinpoint strong sales over the past few months as helping to reinforce their positive mood, with only 12% of businesses saying volumes since September 2004 have been weaker than the rest of the year. - Retailers cite changes to lifestyle, more competitive pricing as well as enhancements to technology for things like digital cameras, plasma TVs and MP3 players as helping to fuel increased consumer demand for many products.