Holiday Forecast: Cloudy with a Chance of Spending

Looking at preliminary predictions about the holiday season, the only real conclusion available is that many pundits and prognosticators don't really want to take the risk of actually making a prediction.

It's a little like when a weather forecaster calls for sun, with a mix of clouds and the possibility of a shower. The forecaster can't really be wrong, but if you're the person with the beach gear in hand taking a last weather check before heading to the shore, the experience can be a little infuriating.

Retailers looking at the early holiday forecasts might feel some annoyance themselves. After all, they have a last chance to trim their inventories or enhance them as fall flutters in, but they're not always getting help in making a decision.

Deloitte, an often insightful organization, just made some statements about the holidays. What is the firm's evaluation of the economy and its prospects and what it all means for the holiday season? Neither increase nor decrease but holiday sales exactly flat with last year.

So, is that good or bad? Depends upon how you look at it, Deloitte suggests. Given the degree to which last year's holiday sales declined, down almost three percent and the first actual decrease in revenues for the season since the research firm began tracking them, a zero percent gain certainly means that it will be an historically very weak holiday season. Yet, given that the holiday season was down almost three percent last year, Deloitte contends, zero isn't such a bad number.

And the insight to be drawn from that is?

The usually reliable Carl Steidtmann, Deloitte Research chief economist, said in a statement published by the firm:

Although there are signs that suggest the economy is nearing the end of its darkest days, many consumers remain burdened by restricted credit availability, high unemployment and foreclosures. Americans continue to save at historically high rates while also paying down debt, and these factors combined suggest another chilly holiday season for retailers.

We are seeing certain economic indicators move in the right direction. The consumer's desire to spend may rally somewhat if gas prices remain stable, home values continue to strengthen and the stock market's comeback persists. These small improvements are part of the reason that retailers may avoid another negative season.

Stacy Janiak, vice chairman and U.S. retail leader, Deloitte LLP, also usually reliable, had only this to say:

While the level of economic uncertainty may be lower than a year ago, consumers will likely proceed cautiously into the holiday season. Retailers appear to have prepared themselves for a challenging season by adjusting inventory and closely managing their expenses. Going forward, scenario planning that accounts for different market conditions may help merchants navigate these uncertain times. Retailers should also consider placing customer insights at the forefront of their decisions around merchandising, pricing and promotions.

Janiak did try to deliver an actual insight when she added:

A growing opportunity for retailers is the surge in consumers who are embracing the digital age. Retailers that can harness the power of technology likely have a better chance of engaging those consumers who are willing to spend. The proliferation of mobile applications and social networks may yield new opportunities to pursue targeted advertising, build brand loyalty and measure campaign effectiveness.

So, what are we looking at? Perhaps it's a phenomenon. Call it Pollyannaphobia. Related to but opposite from the Chicken Little Effect, Pollyannaphobia is a fear of saying anything unqualified about the prospects for the recovery that might make one look foolish if said economy doesn't improve. It's widespread today, even affecting the chairman of the Fed.

The Chicken Little Effect occurred early last year when some of the same folks who are stricken with Pollyannaphobia these days were muttering, quietly and with qualifications, about signs the economy was stumbling without actually predicting a recession, which it turned out we already were in.

So, don't expect many definitive predictions about the holiday season, and if someone does expose a neck by saying something definitive, show them some respect, right or wrong. Sometimes being a Pollyanna, or a Cassandra for that matter, takes intestinal fortitude.

What do the prospects for holiday look like really? Automobiles â€" and the Cash for Clunkers program â€" aside, retail spending dipped in July but picked up a bit in August, although a Barron's look at sales indicated that the trend would fall off for September and potentially lead to a relatively weak back to school performance. Given that almost the only thing that has consistently motivated consumers to spend during the recession is kids, a weak result from back to school suggests a weak holiday season, one that is more likely to come in under last year's level than at or above. If back to school finishes strong or if unemployment improves unexpectedly signs might flash to positive, but hedging bets looks like the way to go at the moment.