Shoppers give retailers early Christmas gift

Consumers pounce on heavy discounts

continued from page 1

Question of the Day

Should Congress make English the official language of the U.S.?

View results

But with growth in retail sales before the Christmas season this year already posting in at a solid 5.75 percent growth rate, he said, the final two months of the year could ring in unexpectedly strong sales growth closer to 4.5 percent.

ShopperTrak reported that Black Friday sales increased 6.6 percent over last year — well ahead of forecasts. The 16 percent jump in retail sales over the Thanksgiving weekend reported by the retail federation wildly exceeded the group’s expectations.

Consumers “recovered in the run-up to the holiday season,” Mr. Bandholz said, after a bone-rattling summer and spring when consumers were depressed by gasoline prices near $4 a gallon and the histrionic debate over budget cuts in Congress, among other developments.

Since that time, average pump prices have fallen to about $3.20 and — ironically — a widely anticipated fight over major budget cuts in Congress that many analysts feared would reprise the summer debacle and overshadow the Christmas season instead fizzled out relatively quietly last week with the failure of Congress’ deficit supercommittee to agree on a budget plan.

Also supporting confidence, American consumers have been largely oblivious to the dramatic debt crisis unfolding in Europe, even though that crisis has rocked U.S. financial markets for months and helped cause the worst Thanksgiving week for the U.S. stock market since 1932.

“Consumers are not likely to be swayed by events overseas unless they materially affect employment prospects here at home,” said Mark Vitner, a senior economist at Wells Fargo Securities.

Despite the brightening mood, the budget wars have the potential to break out again and rain on the Christmas shopping parade, said Mr. Bandholz.

That is because the deficit committee failed to come up with a plan to extend payroll-tax cuts and unemployment benefits that expire at the end of the year, which could lead to a huge cut of $155 billion in consumers’ disposable incomes next year, he said.

Growth in inflation-adjusted incomes already has been negligible this year, forcing consumers to dip into their savings to finance their recent spending spree, he said. So the abrupt loss of income in January will severely limit consumers’ ability to keep on spending, he said.

“Both private consumption expenditures and [inflation-adjusted economic output] could very well decline in the first quarter of next year” as a result, Mr. Bandholz said. “The satisfactory holiday shopping season would, therefore, be merely the calm before the storm.”

© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.

Comments
blog comments powered by Disqus
TWT Video Picks