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Holiday gifts © Corbis

Extra11/20/2006 10:00 AM ET

Toy shortage for the holidays?

Production problems and high consumer demand are likely to cause a toy shortage this season, says a newspaper report.

Will Santa run out of toys this Christmas? Some industry Grinches are worried that the elves might come up a bit short this holiday season.

Underestimated demand has coupled with production problems in Chinese factories to cause a toy shortage this holiday season that extends beyond limited supplies of Sony's (SNE, news, msgs) hot PlayStation 3, according to a Wall Street Journal report today.

Chinese toy factories have experienced labor shortages as workers abandon their jobs for better-paying positions at higher-tech manufacturing companies, the article said.

In addition, power blackouts in southern China, where many of the factories are located, have led to decreased production, according to the Journal.

Oops! Misjudging consumer demand

The production issues come on top of already underestimated holiday demand.

Retailers and manufacturers looked at last year's slow sales and placed conservative orders this year, only to be met with higher-than-expected demand, marked by earlier holiday shopping trends, the article said.

Mattel's (MAT, news, msgs) giggling TMX Elmo is already selling for $65 on online auction site eBay, while it sells for $40 at its regular retail price. Likewise, Walt Disney (DIS, news, msgs) has been pressed to get its latest Mickey Mouse, Goofy and other toys in stores faster than anticipated, the article said.

Both companies are eating the cost of air-shipping the finished toys over cheaper but slower ocean shipping, the article said.

Shares of Disney rose slightly to $32.98 in early trading, from their New York Stock Exchange close at $32.94 Friday.

Shares of Mattel were up a few cents at $23.70, while shares of Sony were flat at $40.79 on the Big Board.

-- MSN Money staff with wires

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