Journalists who write about government spending get clobbered on a regular basis for using the term "budget cut" to describe a smaller-than-expected rate of increase. Why don't business writers get clobbered for doing the same thing when they tally holiday spending? " Retailers Face Worst Holiday in 30 Years," proclaimed the Washington Post on Dec. 24. "Shoppers had told polling organizations earlier that they would spend less this year than last year, and they probably did," reported the New York Times on Dec. 25. Even the financially sophisticated Wall Street Journal ran a Dec. 26 Associated Press story with the misleading headline, "Retailers Fear Weakest Sales in Decades as Final Rush Fades."
A close reading of any of these stories makes clear that more U.S. dollars were spent buying holiday gifts this year than in any previous year since the birth of Jesus Christ. Or at least, that's what the estimates given most credence by these newspapers say. The AP and the Post cite the Bank of Tokyo-Mitsubishi Ltd., as estimating a 1.5 percent increase. The Times cites Charles Hill, research director at Thomson First Call, as estimating a 1 percent increase.
The business press pegged the 2002 holiday shopping season the "worst in 30 years" not because sales declined, but because sales increased by a smaller-than-expected percentage. A survey by the International Council of Shopping Centers found a median expected increase of 2 percent. Compared to that, 1 percent or 1.5 percent is obviously disappointing. Last year, holiday sales increased 2.3 percent over the previous year's. One or 1.5 percent is clearly a smaller rate of increase than 2.3 percent. But it's inaccurate to call a smaller rate of increase "less" spending.
It is true that this year's holiday spending didn't keep pace with this year's overall rate of inflation. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index rose about 2 percent over the past year. Corrected for inflation, then, holiday spending declined somewhere between 0.5 percent and 1 percent. Maybe people are spending less on presents so they can spend more on health care, whose cost rose 5 percent over the past year. At any rate, if people this year spent 0.5 to 1 percent less in "real" (i.e., after-inflation) dollars than they did in 2001, an accurate way to summarize that would be to say, "People spent about as much this year as they did last year buying Christmas presents."
[Update, Dec. 27: The New York Times today made "holiday sales tank" the lead story on Page One.]