Superstorm Sandy likely to cut holiday spending, expert says

November 1, 2012  


WEST LAFAYETTE, Ind. - Superstorm Sandy could put a major dent in what had been shaping up as a decent holiday season for retailers, a Purdue University expert says.

Residents of the areas hardest hit by Sandy likely will be reluctant to spend much money, whether insurance payments or savings, on holiday gifts, says Richard Feinberg, a professor of consumer science and retailing.

"The states affected by Sandy account for approximately 16 percent of all holiday spending," he says. "And even a small decrease in their spending will have a large impact on national numbers."

Feinberg had been expecting about a 4 percent increase in holiday retail sales compared to a year ago. Now he expects the increase to be between 2 percent and 3 percent.

"Even if things returned to normal before Thanksgiving, optimism and consumer confidence are likely to be lower, affecting spending on gifts," he says. "Consumers will be suffering from what we might call post-Sandy traumatic stress, which will lower their inclination to spend."

Feinberg notes that there will be spending in the wake of the hurricane, and the overall economy may benefit, but it will be over an extended period of time past the traditional holiday spending season as houses and infrastructure are rebuilt.

"People will spend for rebuilding, for replacement home furnishings, for replacement electronics," he says. "But it will be for their homes, not for gifts."

An unknown effect of the hurricane will be lost wages that can't be recovered, he says. This is the money that normally would be spent for the holidays.

"Uncertainty is the enemy of holiday shopping," Feinberg says. "What happens between now and Thanksgiving will determine if consumers can be confident that things are getting better and they are free to spend or that things may continue to get worse and they need to hold back."

Writer: Judith Barra Austin, 765-494-2432, jbaustin@purdue.edu

Source: Richard Feinberg, 765-491-5583, xdj1@purdue.edu

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