(Updates with retail sales’ impact in first paragraph.)
Dec. 6 (Bloomberg) -- Spending on Christmas trees in the U.S. will rise 3.1 percent this year to $3.4 billion, the highest since before the recession gutted retail sales in 2008, as demand and prices increase, researcher IBISWorld said.
Americans will spend about $800 million for 25 million real trees and another $2.6 billion on 10 million artificial versions during the holiday season, Nikoleta Panteva, a senior analyst at Los Angeles-based IBISWorld, said in an interview.
“We expect strong tree sales this year and strong holiday sales overall,” said Jean Niemi, a spokeswoman for Atlanta- based Home Depot Inc., the world’s largest home-improvement retailer and the biggest seller of cut trees. “History shows us that even in a down economy, the Christmas tradition isn’t one that families part with.”
Spending on trees is up for a third straight year after plunging almost 11 percent in 2008, when the global economy sunk into its worst recession since World War II, according to IBISWorld. Consumer confidence jumped last month by the most since 2003, and the unemployment rate in November was at a 32- month low. The National Retail Federation says U.S. retail sales reached a record during the four-day Thanksgiving weekend, signaling consumers aren’t cutting back on holiday purchases.
In 2008, Americans spent $3.14 billion on trees, down from $3.51 billion in 2007, as the recession erased $27.9 trillion in the value of global equities and unemployment in the U.S. was headed to the highest level in almost three decades. Retail sales in the U.S. plunged in December 2008 to the lowest in more than three years.
“We’ve heard optimism from both wholesale and choose-and- cut growers,” said Rick Dungey, a spokesman at the National Christmas Tree Association. “They think the number of trees purchased might be more this year than last year.”
Some retailers are increasing Christmas trees and supplies in anticipation of stronger sales this year. Home Depot expects to at least match last year’s tree sales of more than 2 million, Niemi said.
Lowe’s Cos., the second-largest home improvement retailer, is offering two additional selections of artificial pre-lit trees this year and expanded its line of garlands and decorations by 5 percent to 10 percent this year, said Colleen Maiura, a spokeswoman for the Mooresville, North Carolina-based retailer.
Total spending for gifts, food and decorations before the Dec. 25 holiday may total $64.3 billion this year, up 3.3 percent from 2010 and the highest since 2007, IBISWorld data show.
“Sales are up,” said Jennifer Greene, the executive director of the North Carolina Christmas Tree Association. “The phone calls have increased over last year, and the orders, the quantities have increased.”
Bottomley Evergreens & Farms Inc., a supplier to Lowe’s, expects to sell 400,000 trees this year, up about 80,000 to 100,000 from last year, said Mack Osborne, the office manager for the 6 million-tree Ennice, North Carolina-based farm.
“We’ve taken on larger orders and are adding to our customer base,” Osborne said. “The demand is there.”
Bob Schaefer, the general manager of Noble Mountain Tree Farm in Salem, Oregon, said he will sell 500,000 trees, about the same as last year, to retailers including Home Depot and Bentonville, Arkansas-based Wal-Mart Stores Inc., the world’s largest retailer. Oregon is the largest U.S. producer of Christmas trees.
“We feel we’re right on trend as far as sales are concerned,” Schaefer said. “Early indications are sales of real Christmas trees should be improving this year.”
Schaefer said his wholesale prices are up about 7 percent this year at about $16 to $19 for 6-foot to 7-foot Noble Firs.
Last year, U.S. farmers received $374.97 million from selling Christmas trees, down 3.3 percent from a year earlier and the lowest in annual cash receipts since 2006, U.S. Department of Agriculture data show.
“I’m afraid when it’s all said and done that we didn’t raise our prices enough” because of higher costs for labor, fuel and fertilizer, Schaefer said. “We’ll be significantly lower. In fact, we may be in the red.”
Oregon has the second-highest minimum wage in the nation behind Washington at $8.50 per hour, according to government data.
“Often the biggest cost for a Christmas tree farm can be labor,” Dungey said, noting that trees older than two years have to be sheared yearly to grow straight.
Fertilizer costs are up 40 percent to 50 percent this year for tree farmers, said Mark Connelly, a research analyst at Credit Agricole Securities Inc. in New York.
Schaefer said his diesel and fuel costs were up 30 percent this year. The national average of regular gasoline at the pump is 12 percent higher than a year ago.
“It’s a significant hit we’re taking because if you’re quoting prices in the spring, that kind of increase isn’t anticipated,” Schaefer said. “We’re taking a pretty big hit.”
--With assistance from Jeff Wilson in Chicago. Editors: Steve Stroth, Daniel Enoch.
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