US holiday sales growth worst since 2008 (2)

Repercussions

Still, this season's weak sales could have repercussions for 2013, McNamara said. Retailers will make fewer orders to restock their shelves, and discounts will hurt their profitability. Wholesalers will buy fewer goods, and orders to factories will likely drop in the coming months.

Steep discounts weren't enough to get people into stores, said Marshal Cohen, chief analyst at the market research firm NPD Inc.

"A lot of the Christmas spirit was left behind way back in Black Friday weekend," Cohen said, referring to the traditional retail rush the day after Thanksgiving. "We had one reason after another for consumers to say, 'I'm going to stick to my list and not go beyond it.'"

Holiday sales are a crucial indicator of the economy's strength. November and December account for up to 40 percent of annual sales for many retailers. If those sales don't materialize, stores are forced to offer steeper discounts. That's a boon for shoppers, but it cuts into stores' profits.

Spending by consumers accounts for 70 percent of overall economic activity, so the eight-week period encompassed by the SpendingPulse data is seen as a critical time not just for retailers but for manufacturers, wholesalers and companies at every other point along the supply chain.

The SpendingPulse data captures sales from October 28 through Monday across all payment methods.

Clearer picture

A clearer picture will emerge next week as retailers like Macy's and Target report revenue from stores open for at least a year. That sales measure is widely watched in the retail industry because it excludes revenue from stores that recently opened or closed, which can be volatile.

In the run-up to Christmas, analysts blamed bad weather for putting a damper on shopping. In late October, Superstorm Sandy battered the Northeast and mid-Atlantic states, which account for 24 percent of US retail sales.

Shopping picked up in the second half of November, but then the threat of the country falling off a "fiscal cliff" gained strength, throwing consumers off track once again.

Lawmakers have yet to reach a deal that would prevent tax rises and government spending cuts set to take effect at the start of 2013. If the cuts and tax hikes kick in and stay in place for months, the Congressional Budget Office says the nation could fall back into recession.

Shopping over the past two months was weakest in areas affected by Sandy and a more recent winter storm in the Midwest. Sales declined by 3.9 percent in the mid-Atlantic and 1.4 percent in the Northeast compared with last year. They rose 0.9 percent in the north central part of the country.

The West and South posted gains of between 2 percent and 3 percent.

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