UT Economist: Fiscal cliff likely reason for sluggish retail spending

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by ANDY PIERROTTI / KVUE News and Photojournalist DEREK RASOR

Bio | Email | Follow: @AndyP_KVUE

kvue.com

Posted on December 26, 2012 at 7:26 PM

Updated Wednesday, Dec 26 at 7:41 PM

AUSTIN -- Like many retailers, Tesoros off South Congress is doing all it can to convince people to spend this holiday shopping season.

“This year just didn’t quit compare. We just didn’t have the traffic,” said Julie Wollenhaupt, an assistant store manager. Tesoros is a wholesale distributor of folk arts and crafts.

According to national figures so far this holiday season, retail spending is up less than one percent. That’s the lowest since 2008 during the deep recession.

Austin shoppers expressed mixed spending habits.

“I think overall, we’re spending less in Christmas shopping and hitting the bargains after Christmas,” said Annette Faehnle, an Austin native who now lives in Key West.

Jesse Bejarano, visiting her daughter from out of state, said “I stayed the same. I’m basically the same."

Her daughter, Rena Shrader, was more confident.

“I felt more comfortable spending more money this year than before," Shrader said.

As a result, it’s not surprising other retail stores provided mixed answers too. Some told KVUE sales were slightly up, while others said this year has been a disappointment.

“I think retailers are always hoping for the best. They’re almost always disappointed, which means their expectations aren’t right,” said Professor Daniel Hamermesh, an economist at the University of Texas in Austin.

Hamermesh said he suspects the looming fiscal cliff could have impacted shopping habits this year. If Congress doesn’t reach a deal next week, most Americans will see a tax increase in 2013.

“The only reasonable explanation, if this is in fact a decline in spending, or not much of a rise in spending, is the possibility that my taxes will be going up in January.“ Hamermesh said.

Faehnle agreed.

“I think it’s always in the back of your mind; whether you’re thinking about it or not. It is definitely playing a factor,” Faehnle said.

Some economists think weather, like Hurricane Sandy in October, played a part in weaker than expected sales.

Hamermesh does not think it played a factor. He also suspects sales figure will likely increase when final numbers are released as early as February.

“These are very preliminary numbers. This happens every year. People somewhat go crazy about the numbers and oftentimes they turn out better,” Hamermesh said.

 

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