Author Topic: 2010 may be biggest holiday retail season ever  (Read 1401 times)

Offline Reginald Hudlin

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2010 may be biggest holiday retail season ever
« on: December 24, 2010, 08:21:47 pm »

2010 may be biggest holiday retail season ever
by Jed Lewison
Fri Dec 24, 2010 at 06:00:05 PM PST
AP reports retailers are preparing for a mad dash to the finish tonight as last-minute shoppers close out the 2010 holiday retail season:

A strong Christmas Eve would round out a surprisingly successful holiday season for retailers. The National Retail Federation predicts that holiday sales will reach $451.5 billion this year, up 3.3 percent over last year. That would be the biggest year-over-year increase since 2006, and the largest total since sales hit a record $452.8 billion in 2007. A strong finish could even give 2010 the crown.

According to the National Retail Federation, retail excluding auto, gas, and restaurant sales was up 7% in November 2010 compared to November 2009.

The big question is whether these improved numbers are sustainable. Without growth in personal income levels, the additional spending is coming from a reduced savings rate. The risk is that in the next month or two, people will hunker down more than usual to make up for the depleted savings. If that happens, then the holiday season surge will look more like a blip.

So despite the strong seasonal numbers, the question remains whether the we'll see a durable economic rebound. On that front, The New York Times reports that economic forecasts from analysts and academics are show growing optimism for economic recovery next year.

Eighteen months after the recession officially ended, the government’s latest measures to bolster the economy have led many forecasters and policy makers to express new optimism that the recovery will gain substantial momentum in 2011.

Economists in universities and on Wall Street have raised their growth projections for next year. Retail sales, industrial production and factory orders are on the upswing, and new claims for unemployment benefits are trending downward.

Despite persistently high unemployment, consumer confidence is improving. Large corporations are reporting healthy profits, and the Dow Jones industrial average reached a two-year high this week.

The Federal Reserve, which has kept short-term interest rates near zero since the end of 2008, has made clear it is sticking by its controversial decision to try to hold down mortgage and other long-term interest rates by buying government securities.

President Obama’s $858 billion tax-cut compromise with Congressional Republicans is putting more cash in the hands of consumers through a temporary payroll-tax cut and an extension of unemployment insurance for the long-term unemployed.

As with the holiday spending numbers, there's an important caveat: if Republicans prevail in next year's budget battles, we'll end up undoing all the stimulative benefits of the tax cut deal. House Republicans are making the case for a twenty percent reduction in spending starting next year -- a draconian fiscal policy shift like that would undoubtedly crush any hopes for economic recovery.

Whatever happens, one thing is pretty clear: the debate over whether to continue trying to grow the economy or whether to embark on the GOP's austerity plan will define the political agenda of the first few months of 2011.