Houstonians bounced back from the recession earlier than much of the nation. They found more and higher paying jobs, and the value of their homes shot through the roof.
Now, they seem more inclined to get out and spread the wealth around.
Jill Foote, finance professor at Rice University’s Jones School of Business, said Houston’s strong economy suggests consumers here will open their wallets for the upcoming holiday shopping season.
“Texas, and Houston particularly, are really outpacing the nation across the board,” she said. “I think retailers are feeling quite good about where they are.”
Foote cited high employment, lower energy prices and a strong real estate market as main drivers of consumer confidence.
“And we have all three,” she said.
While acknowledging that cheaper gasoline is a mixed blessing locally, Foote said she thought the economic boost from recent oil and gas activity would keep consumers in a spending mood.
For some retailers, Houston could even buoy lagging sales elsewhere.
Jason Baker, of Houston retail brokerage firm Baker-Katz, said he’s fielding calls daily from retailers looking to expand or debut in Houston.
“Retailers who have put an absolute freeze nationwide on expansion, and they’re expanding in Houston,” he said. He said the interest is based on strong sales at existing Houston stores.
“I would say consumer confidence in Houston is the highest that I’ve ever seen it,” said Baker, who has 20 years in the business.
Confidence up in U.S.When H&M opened a two-story store in the Galleria earlier this month, there was a line to get in throughout the day.
That all bodes well for retailers prepping for their biggest season of the year, and whose outlooks across the country are more cautiously positive. Nationally, consumer confidence is at a seven-year high, finally rebounding across the optimism threshold defined by market research firm Nielsen as scoring more than 100 on its Consumer Confidence Index.
But it’s not coming back at the same pace as the economy.
Target said in a statement that it “expects this year’s holiday season to be highly competitive and promotional,” adding, “we are encouraged by the number of families that come out and shop and make Target part of their family tradition.”
Macy’s lowered its profit outlook for the season last week, following a shortcoming in third-quarter sales, the Associated Press reported.
Optimism in Houston
But independent store owners in Houston are optimistic.
Marie Earthman, who owns Pomp and Circumstance women’s boutique on Westheimer, said the store got a lot of business with the Houston Holiday Shopping Card, a $75 card that benefits the American Cancer Society while offering discounts at 700 Houston stores.
“I really feel like that kick-starts, for Houston, holiday spending,” said Lauren Brady, head buyer at Biscuit home and gift store on Westheimer. The store just moved in to the new location, nearly tripling its showroom space.
“With the expansion, we’re expecting a lot of growth in sales for the holidays,” Brady said.
Laureen Segreto, shopping at the Galleria recently, said she would probably spend more this year, in part because she has a new grandchild to shop for. But she’ll be on the lookout for bargains, using coupon sites like RetailMeNot.com and comparing prices on Google.
A quarter of consumers nationally said they would spend more during the holiday season this year, up from 20 percent last year, according to a study by consulting firm Accenture. And the National Retail Federation said Americans will spend $804 on average, 5 percent more than last year.
Overall, the group predicted shoppers would spend $616.9 billion,4.1 percent more than last year, when seasonal sales rose 3.1 percent. Over the last 10 years, holiday sales have risen an average of 2.9 percent per year. Holiday spending will account for 19 percent of annual sales in the industry, the retail federation said.
These levels are “pretty modest given how much the economy has improved in the last year,” said Kit Yarrow, a consumer research psychologist at Golden Gate University.
Relief at the pump
But lower fuel prices promise a little more room in shoppers’ budgets.
Typically, with, “gasoline prices down, you will see more holiday spending,” Jill Foote said. “If you’re on a fixed budget, having gasoline prices being lower will give you more discretionary spending money.”
According to a survey by the National Association of Convenience Stores, 14 percent of people said they would spent more this season thanks to falling prices at the pump.
Consumer confidence is often tied to pump prices. For every 1 cent drop, the association reported, Americans save $3.7 million.
Nielsen data also show that blacks, Hispanics and Asian-Americans are driving a lot of the expected growth in sales. In a survey, 10 percent of respondents said they plan to spend more on holiday shopping this year.
That included 17 percentof blacks who said they would spend more this year, followed by 13 percentof Hispanics and Asian-Americans.
James Russo, who oversees global consumer insights for the company, attributed this in part to younger multicultural consumers beginning to start families.
But national spending isn’t rising at the same pace that the economy is recovering as shoppers remain cautious.
“Before the recession, with economic indicators like these, we would’ve seen more robust spending,” Yarrow said. “But I think the recession has really changed how people shop, and they’re really judicious in how they spend.”
Half hold back
Russo noted that “despite improving economic conditions, it’s not improving for everyone yet.” He said that about half of consumers say they’re spending freely now, while half report spending money only on basic needs.
“There’s a disconnect between the macroeconomic conditions and what’s going on with the consumer at the microeconomic level,” Russo said.
Coming out of the recession, “what stuck is you have consumers that are doing a high degree of planning,” he said.
Shoppers will be on the lookout for deals, because of lingering caution and because shoppers have been trained to be wary of full-price items.
“I think consumers are looking for bargains as an assurance of value,” Yarrow said, noting that in the past consumers needed the discounts to afford items. “They’ve been trained by retailers to expect them.”
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