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The Christmas Tree Indicator: Myth or Magic?

Tuesday, 2 Dec 2008 | 4:47 PM ET

Is your willingness to "deck the halls" linked to the economy?

For the past five years, investment research firm International Strategy & Investment has conducted a survey of Christmas tree wholesalers and retailers to track Christmas tree sales as a way of gauging how consumers will spend during the holidays. During that time, tree sales have risen when consumers are spending and shrunk when they cut back.

According to Oscar Sloterbeck, head of company surveys at ISI, the idea grew out of a conversation the firm had with a client, who sold Christmas trees.

In the first week of the holiday selling period, ISI's survey found sales of Christmas trees, wreaths, and garland rose 8.5 percent, Sloterbeck said.

"That's a pretty strong reading," Sloterbeck said.

One caveat is that this year the holiday selling period is a bit more compressed. There are 27 days between Thanksgiving and Christmas, which is the second shortest number of days possible. (Last year, there were 32 days in the season.)

This means, consumers may be more rushed to head out and purchase their decorations. Also, the weather was fairly good last weekend.

Sloterbeck will be tracking sales throughout the rest of the season to get an early gauge on retail sales.

Overall, ISI is expecting a broad measure of consumer spending to fall 4 percent in the fourth quarter from a year ago.

Rick Dungey, a spokesman for the National Christmas Tree Association, said his organization has found no statistical correlation between the economy and sales of trees.

Last year, about 31.3 million households purchased a real tree, compared with about 17.4 million households that had an artificial tree, according to the National Christmas Tree Association. Since 2001, the number of homes celebrating with a real tree has ranged from a low of 22.2 million households in 2002 to a peak of 32.8 million households in 2005.

According to Dungey, weather plays a bigger role in tree sales. In the northeastern U.S., consumers often wait until the weather gets cold and snowy to head out to the tree farm. But in the Midwest and Central U.S., warm weather sends tree shoppers out in droves, Dungey said.

“Rain is bad,” he said. “No one goes out when it rains.”

Other factors that contribute to the decision to purchase a real tree, include whether there are children in a household and travel plans.

Households with children have been buying fresh-cut trees in rising numbers, often at farms that allow customers to cut down their own tree.

“They want the tradition,” he said. “Those memories of going out and picking out a tree…You cannot get that dragging a dusty box down from the attic.”

As for travel plans, folks tend to not buy a real tree if they are going to be away for the holidays because they won’t be there to water it.

This year, “optimism is high” for tree sales, Dungey said.

Early orders have been strong, according to Bryan Ostlund, executive director of the Pacific Northwest Christmas Tree Association.

He agrees that travel plans play a big role in how people celebrate the holidays.

His group has seen upswings in tree demand in the early 1990s, and in 2001 and 2002, when more people stayed home.

“Usually when the economy is down, people don’t travel as much,” Ostlund said.

There are emotional factors at play, too, according to Ostlund.

Much like the holiday meal, the Christmas tree can be a focal point of the celebration.

“People will find other areas where they can cut spending,” he said.

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Questions? Comments? retaildetail@cnbc.com

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