Business Update with Mark Lacter

Holiday season: retail sales and consumer confidence

KPCC business analyst Mark Lacter talks about how consumer confidence is holding up for this holiday season; he also talks about how retailers across the country are already seeing some encouraging signs that sales will be better this season than last.

Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, any encouraging signs on holiday shopping?

Mark Lacter: Certainly more encouraging than what economists had been forecasting only a few months ago. Retail sales for October were stronger than expected, which is a good thing. Also, some of the department stores like Macy's are back to reporting profits (that’s quite an improvement over the last couple of years), and retailers have bigger inventories, which would suggest that they're expecting a decent season. Actually, we've seen signs of that for the last couple of months with the increased amount of container traffic coming into the Ports of Los Angeles and Long Beach from Asia.

Julian: Are there other indicators?

Lacter: You see a lot of them - the Auto Club did a survey in Southern California and found that more people would be spending more money on gifts and on travel than last year. And it's kind of weird because the consumer confidence numbers would indicate that folks are still extremely glum about the economy. But they're a little less glum about their own situation, especially if they have a job. Actually, the number of people who say they're better off than they were a year ago has gone up, and the number saying they're worse off has gone down - not by large amounts, but large enough to indicate that attitudes about spending money could be starting to change.

Julian: The question, I suppose, is what people will buy during the holidays and how much they're willing to spend.

Lacter: And then what happens after the holidays - will consumer spending hold up. Let's also not forget about the millions of Californians who are still out of work. That's a large percentage of consumers who aren't about to purchase any big-ticket items - and without them the economy can only grow so much.

Julian: There's one local company in particular that will do well during the holidays...

Lacter: Right, it's Activision, which is based in Santa Monica and has been cleaning up from the latest version of its "Call of Duty" videogame, this one called "Black Ops." Sales in the first 24 hours were $360 million. That breaks the first-day videogame sales record that was set last year for the previous version of "Call of Duty" - and it's especially impressive considering that this has been a terrible year overall for videogame sales.

Julian: Is it a big deal for the Southern California economy?

Lacter: In some ways yes. Besides Activision, there are two dozen or more companies that have a big presence in L.A. and Orange counties. That's 10,000 jobs and payrolls of $1.3 billion. But the industry is changing because of the Internet. Games are available for smart phones and iPads and social networks, and all these alternatives are clearly eating into the sales of the traditional console game. It’s the same kind of fractionalizing that Hollywood has been going through, which means that all these companies are trying to figure out how to stay relevant - a tough assignment.

Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes business blogs at LA Observed.com and at kpcc.org.


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