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Back-to-school sales lag, a bad sign for holiday season

A Target customer shops for back to school supplies in Daly City, California.

Steve Chiotakis: Sales at retail stores across the country were flat last month. The Commerce Department this morning said there was
only tepid response to big back-to-school sales and bargains. Retailers look at those
numbers to get an idea about what to expect in terms of holiday sales.

Chris Christopher is senior principal economist at IHS Global Insight. He's with us live from Massachusetts this morning. Hi Chris.

Chris Christopher: Hi, how are you?

Chiotakis: I'm doing well. I thought back-to-school sales were big money makers for the retailers, what's going on?

Christopher: It is the second most important season in the year -- after the holiday season. However, this year, back-to-school sales don't look so good. It'll be above water -- you know, in positive territory -- but not as strong as last year.

Chiotakis: What does that say about the broader economy? Is this just one more sign that the recovery's stalled out?

Christopher: Yes. The probability of another recession is extremely high. And looking at how consumers are behaving, which form about 70 percent of all spending hte economy, things look very, very flat. At least they're not going in negative territory. And if people are not spending for back-to-school, it sort of indicating to retailers that the holiday season will not be very robust.

Chiotakis: So this is a glimpse into the holiday season, right? This is what they're looking at?

Christopher: Yes, and retailers are also looking at it as well. They're saying, "Hey, how are people behaving? How do my cash registers look?" And then they'll plan for the holiday season. So they might not accumulate too much inventory.

Chiotakis: What are the biggest consequences? Are we talking bigger discounts? Store closings?

Christopher: Well yes, if retailers can't make it through the holiday season there'll be store closings or some retail chain stores will cut back on their number of locations. If there's excess inventory, they might do some price discounting. Last year, they did a lot of price discounting -- even before Black Friday.

Chiotakis: Chris Christopher from IHS Global Insight. Chris, thanks.

Christopher: Thank you.

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