Shopping season is key to Utah's economic vitality

Shopping season is key to Utah's economic vitality

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SALT LAKE CITY — Thanksgiving is the prelude to the official start of the holiday shopping season, signifying the launch of the most important economic period in Utah and across the country.

Analysts say holiday shopping comprises 75 percent of the nation's annual gross domestic product. Economically speaking, the final weeks of the year are critical to the growth — or lack thereof — for the entire country.

The impact of holiday spending is also crucial to the local economy as well, explained Zions Bank senior economist Robert Spendlove.

"It is the consumer that keeps the economy going," Spendlove said. "It is so important for people to be out there spending."

The power of the consumer

As consumer spending rises, the result is increased employment as companies hire more workers to produce the supplies of goods demanded by the consuming public, he said. It is the key economic driver for growth, Spendlove added.

"If the consumer has confidence and continues to spend, then it keeps the economy going," he said. "This is a really important time for our economy now."

Retail spending is expected to reach almost $630 billion nationwide this holiday season, according to the National Retail Federation.

Spending at small businesses

If all Utah consumers shifted 10 percent of their spending to local businesses on a yearly basis, $1.3 billion would stay in Utah's economy, according to data from a Utah Study Series. Consumers may participate in "Shift Your Spending Week" from Friday, Nov. 27, through Saturday, Dec. 5.

The campaign is an effort by local businesses to promote economic stability and growth in their communities, explained Betsy Burton, owner of The King's English Bookshop in Salt Lake City.

"The thing that makes this (campaign) important is that it says to the consumer, 'What I do with my spending actually does shape my community,'" Burton said.

Once consumers realize that a relatively minor shift in their spending — just 10 percent — can have that much of an impact on the economy, it really "hits home," she said.

"We are trying to get them to understand that local business gives back so much more to the community and the economy than national businesses and the Internet," Burton said.

'Shift Your Spending Week'

She and other local merchants are encouraging increased support for "Shift Your Spending Week" to compete with growing competition from chain retailers and online merchants.

"This small decision they make can truly make a difference," Burton added.

She noted that for every dollar spent with a local business, $5 stays within the state economy. Spendlove described the phenomenon as the "multiplier effect" — the increase in final income arising from a new injection of spending.

"Every dollar that is spent gets re-spent within the economy, and the power of that multiplier effect can really increase the impact of spending on a local economy," he explained.

That $1.3 billion can turn into a much greater amount — possibly a $3 billion to $5 billion impact, Spendlove added.

Impact of local spending

The direct impact of the local spending effort would be in the wages of the people working at the establishments, along with the profits of the local owners and the increase in production of the business if the products are created or grown locally, he explained. Additionally, the indirect impact might include rent on the property or the delivery mechanism, Spendlove said.

"The people that have those benefits from the direct impacts then start respending those dollars into the local economy," he explained. "Then it can go into other retailers, housing, transportation, (and) literally starts to reverberate and churn through the economy."

Nationally, retailers have been taking an even more aggressive approach to launching holiday shopping.

According to Chris Christopher, director of consumer economics at IHS Global Insight, retailers in recent years have begun their holiday price promotions progressively sooner, rather than waiting for Black Friday to begin offering price discounts.

Many retailers will open their doors on Thanksgiving Day, being called Gray Thursday, to get a head start on Black Friday mania, he said. As a result, those early sales have been cannibalizing Black Friday sales.

"Holiday retail sales are expected to rise 3.5 percent above last year, not as strong as last year's showing, but significantly stronger than 2013 and 2012," Christopher said. "This year's holiday retail sales are expected to be a tad shy of $630 billion."

Additionally, holiday retail sales growth on the Internet will likely outpace last year's growth — rising from 10.9 percent in 2014 to 11.7 percent this year, he added.

"Online holiday retail sales are expected to come in around $95 billion in 2015," Christopher said. "As a share of holiday spending, online holiday retail sales will reach a new high. Last year, online sales represented 13.7 percent of holiday retail sales, and this year that share is likely to be 14.7 percent."

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Jasen Lee

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