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Online spending growth over holiday season slows

The 19% rise from a year earlier is a record low as economic issues weigh on shoppers.

January 08, 2008|From Bloomberg News

Internet holiday spending climbed 19% during the recent season, the slowest pace on record as consumers pressured by higher prices and rising mortgage defaults cut back on purchases.

Online spending in November and December reached $29.2 billion, according to research firm ComScore in Reston, Va. The results trailed its forecast of a 20% gain from a year earlier.

Slower Internet sales growth during the first 10 days of November pushed spending below the forecast, ComScore said. Consumers have pulled back, possibly resulting in the worst holiday shopping season since 2002, as they face the worst housing market in 27 years and gasoline prices above $3 a gallon.

People "were probably shopping closer to paycheck schedules and trying to stretch out their spending," said Patricia Edwards, a Seattle-based money manager at Wentworth, Hauser & Violich.

The busiest day was Dec. 10, with a 33% sales jump compared with a year earlier, ComScore said. Video games, consoles and accessories had the biggest growth, more than doubling. Furniture, appliances and equipment followed with a 67% gain.

For retailers that also operate bricks-and-mortar stores, their online units may help profit because of their lower costs, Edwards said. She called the results "pretty healthy," even if below forecasts.

The 31-member Standard & Poor's 500 retailing index increased 2.80 to 381.66 following an 18% decline in 2007.

Crude oil prices topped $100 a barrel last week, and the average price of a gallon of gasoline cost 30% more last month than in December 2006.

Falling home prices are posing a risk to consumer spending by making it harder for owners to tap home equity for extra cash.

Such factors prompted the National Retail Federation to forecast a sales gain of 4%, the smallest in five years, for November and December combined. It will report December sales results Jan. 15.

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