Good news? Holiday spending to be flat

Holiday sales are expected to be flat in the United States this year. This is an improvement over last year, when holiday sales dropped 2.4 percent. If all goes as planned, holiday sales will reach $810 billion for 2009, not including cars and gas, Reuters reports.

The anticipated lack of change in the retail picture is driven by caution among consumers, in particular because of a difficult job market. Unemployment is already close to the 10 percent emotional threshhold, a level it is expected to pierce early next year. Without a sure way to replace the income they worry about losing, consumers are likely to "white-knuckle" their wallets during the 2009 holiday shopping season.

Last year's decline is unlikely to be repeated, though. Stable gas prices, increases in home values and upward bumps in stock prices have provided a measure of support for households. In August, retail sales edged higher 2.7 percent, better than expected and its fastest rate of growth in three and a half years. Retail sales were helped in part by the "cash for clunkers" program. With positive indicators in these areas, consumers may be a bit more likely to ease their financial grips a bit.

While there are some positive signals, there is still enough counterbalancing downward economic pressure to constrain holiday spending this year. "Although there are signs that suggest the economy is nearing the end of its darkest days, many consumers remain burdened by restricted credit availability, high unemployment and foreclosures," said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP.

An increase in savings continues to frustrate economic recovery efforts. Retail sales constitute 70 percent of all economic activity in the United States, and an unwillingness to spend limits growth. "Americans continue to save at historically high rates while also paying down debt, and these factors combined suggest another chilly holiday season for retailers," Steidtmann said.

Stacy Janiak, vice chairman and U.S. retail leader for Deloitte, however, observes that the uncertainty pervading the economy a year ago has dissipated, and layoffs haven't been as prevalent outside the financial services industry as within it. Consumer behavior, she continues, has been "controlled and conscious."

Because the retail sector is steadying, Janiak believes that there won't be as many deep discounts as there were during the 2009 holiday season. "Retailers appear to have prepared themselves for a challenging season by adjusting inventory and closely managing their expenses."

So, caution is the watchword in retail, with buyers and sellers alike crossing their fingers to find hope for next year under their Christmas trees.

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