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Retail Forward's Future Spending Index turned sharply lower in October, dropping to 94.0 from 104.6 a month ago, suggesting that shoppers intend to curtail their spending this month.

“The economic side effects of Hurricanes Katrina and Rita have sent a collective shudder through the consumer sector," said Steve Spiwak, an economist with Retail Forward. "Higher energy costs are the main culprit for the falloff in spending intentions for October. But the storms also have heightened concerns about job security and the direction of equity markets, contributing to the soft near-term outlook."

The Retail Forward report attributed October's falloff to greater pessimism among Up and Middle Market households, segments that had exhibited some strength in recent months. Interestingly, plans for Down Market households held nearly steady. This is partly because spending plans for the Down Market segment had already fallen steeply in the prior two months in response to the impact of rising energy costs.”

As for the extended outlook, the report says that any short-term pull back on spending likely will be felt first by entertainment industries. Some goods purchases that are easy to postpone, such as apparel and electronics purchases, also are vulnerable. Furthermore, many shoppers already are beginning to compose their end-of-year holiday shopping lists, but are keeping recent events and concerns about the economy in mind – which almost certainly will have an impact on holiday spending.
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