Santa not seeing the Obama recovery
posted at 7:46 pm on October 20, 2012 by Jazz Shaw
In addition to the traditional, religious joy of the Christmas season, it usually brings along presents of another kind to politicians in power. Sales, particularly for toys and entertainment products, tend to see a sharp rise in the fall. This can spur additional hiring, if only of the seasonal variety, and a short term sugar rush for the economy at large. So if we’re going through a huge recovery, as the First Lady recently said, this should provide an additional boost to Barack Obama’s prospects in the final weeks as we approach November. Yet strangely… it hasn’t.
As retailers gear up for the busy holiday shopping season, there’s trouble brewing in Toyland, according to research from Goldman Sachs.
Toy sales have been on the decline for some time, but Goldman suspects the trend may be accelerating, and this week the firm cut the industry’s rating to “cautious” from “neutral.” It also downgraded Hasbro shares to “sell” from “neutral,” while keeping Mattel shares at “neutral.”
As noted, this is likely part of a longer term trend, not something that just suddenly happened under Obama’s watch. Goldman estimates that toy sales are down roughly 30% over the past fifteen years and there are a number of factors at play. These include the increase in hand-held, internet capable devices which act as “toys” in parallel with their normal functions as phones, readers, etc. And of course, the depressed economy hasn’t helped matters. But if we’re truly in a sustainable recovery and people are going back to work, it seems as if the newly prosperous families would be celebrating with some nice gifts for the kids, if not stabilizing the decline in sales, at least slowing it.
Instead, it’s accelerating.
“The nominal amount spent on traditional toys/games in the U.S. per capita is down 30% from $85 per person to $60 per person since 1998, and the pace of the decline has accelerated to 5% to 10% year to date,” said Michael Kelter, an analyst at Goldman Sachs, in a research note announcing the ratings changes.
If this is a huge recovery, I’d hate to see a stagnant one. It almost makes you want to run out and buy a few more gifts just to keep the kids happy. But if this is yet another factor which leads to Barack Obama failing to win a second term, my previous suggestion that perhaps he could move to the Island of Misfit Toys is probably off the table.