Holiday Cash May Not All Go to Presents

Americans are paying more at gasoline pumps, donating cash to Hurricane Katrina relief efforts and bracing for higher heating bills.

The mounting expenses are causing analysts to question how much consumers have left to spend during the holiday shopping season.

Since the beginning of August, sales at established chains nationwide have dipped every week but one, when they were flat, according to the International Council of Shopping Centers.

The situation worsened last week when comparable store sales fell 2.1%, the largest weekly drop since December 2003, according to a report released Tuesday.

The pace of year-over-year sales growth also has slowed.

“It’s tough to find any good news for the holiday season,” said Michael P. Niemira, the group’s chief economist. “You look for what health is out there and I can’t find anything.”

Gasoline prices, which soared past $3 a gallon in many cities, had begun to crimp spending even before Hurricane Katrina hit the Gulf Coast, he said.

While pump prices initially affected mostly low-income households, they’re now cutting into the discretionary income of people with fatter paychecks, according to surveys Niemira conducted between July and September.

The test of shoppers’ endurance will come just as the holiday shopping season swings into gear when home heating bills start to arrive.

The price of natural gas is expected to be much higher in the coming months and forecasters are anticipating a colder-than-usual winter for most of the nation.

Some homeowners will find that heating bills are twice as high as they were last winter, analysts say.

Other surveys have found that Katrina has damped consumer confidence. Many people aren’t even bothering to step into stores, according to a recent poll by America’s Research Group, a consumer research firm in Charleston, S.C.

Retail traffic dropped as much as 16% in the weekend after Labor Day in most of the categories surveyed, said Britt Beemer, the research firm’s chairman.

“It’s one of the biggest drops I’ve seen in the 26 years I’ve been doing research,” he said. “I think Katrina is going to have an impact on retail shopping all the way through Christmas.”

Even before the hurricane struck, many retailers were lowering profit expectations for the second half of the year. And economists were warning that a cycle of easy money, aided by mortgage refinancing, was coming to an end.

“Our home has been our piggy bank,” said Sung Won Sohn, an economist who is president and chief executive of Los Angeles-based Hanmi Bank. “The piggy bank, I think, is closed.”

To be sure, analysts are not predicting that holiday sales will screech to a halt.

The National Retail Federation, the industry’s largest trade group, said Tuesday that it expected sales to rise 5% this year to $435.3 billion, compared with last year’s strong 6.7% increase.

An Ernst & Young forecast released Tuesday -- which excludes grocery stores -- projected an increase of as much as 7% for November and December, compared with an 8.3% rise last year.

But retailers’ things-to-worry-about list has been growing.

Many national chains operated stores that were damaged, some severely, by the hurricane just as the bulk of fall merchandise was flowing into stores. Businesses must look to refurbishing or rebuilding stores, while paying idle employees to stay on the payroll.

One in five American workers are employed in the retail industry, including about 64,500 in Louisiana, Mississippi and Alabama, said Ellen Davis, a spokeswoman for the retail federation.

While businesses grapple with their challenges, many consumers will be more determined than usual to find bargains, some analysts say. Beemer, for example, said he has seen a heightened frugality among shoppers.

That means retailers -- already used to slashing prices -- will have to outdo themselves. “We will be seeing products at prices that we haven’t seen in 20 years,” said Marshal Cohen, chief retail industry analyst at NPD Group, a market research firm in Port Washington, N.Y.