Holiday retail sales up except for dip in December

By CELESTE BOTT
LANSING – Retail sales have yo-yoed in recent months, including a dip in December, but Michigan businesses say their overall holiday sales improved from 2011.
But the challenge now is overcoming a significant sales decline at the end of the year.
Fifty-four percent of retailers reported better holiday sales than in 2011, while 30 percent reported declines.

The Michigan Retail Index, a joint project of the Michigan Retailers Association and the Federal Reserve Bank of Chicago, measures the performance of the state’s retail industry. Data is based on the Federal Reserve and the association’s monthly membership surveys.
For the overall holiday season of October-December, sales at individual stores and websites were up an average of 2.9 percent.
The December index was 46.6, down from 60.2 in November. A year ago in December it was 59.1. The higher the index, the stronger the sales activity. Any value over 50 generally indicates positive sales activity.
James Hallan, president of the association, called the results mixed.
“December was a disappointment for many Michigan retailers, and it took strong sales in October and November to offset that end-of-year dip,” Hallan said.
According to a report by William Strauss, senior economist at the Federal Reserve Bank, the industry had a strong boost going into the traditional Thanksgiving-Christmas shopping season.
So why the December decline?
“It’s hard to pinpoint the exact reason,” Hallan said. “But the unemployment rate was stuck at 8.9 percent in December. And perhaps shoppers became cautious over the inaction in Washington prior to Christmas to resolve the ‘fiscal cliff’ issue and prevent significant tax increases.”
But Strauss said he is skeptical of identifying specific reasons for the sales dip.
“There’s always a way to spin data like this – it just depends on whatever interpretation you want to use,” Strauss said. “The holiday season started strong and ended weak, and we did take inflation into account.”
Strauss said it would be hard for Michigan retailers to come up with a solution to the decline because everyone may interpret the changes differently.
“I’ve heard a number of explanations,” he said. “Maybe there was a different, more severe weather pattern this December than last. Some people have even interpreted that the Connecticut shooting made people too somber to shop.”
Some legislators argue that an increase in online shopping with out-of-state vendors could also be a factor.
A 2011 state Treasury Department report predicted that Michigan would lose $242 million in uncollected tax revenue from online sales in fiscal year 2013.
Last year, the Legislature failed to pass a bill that would eliminate a loophole enabling out-of-state online retailers to capitalize on incentives such as not collecting Michigan’s 6 percent sales tax.