Holiday Sales Seen Rising 4.1 Percent in 2012

The holiday shopping season is one gauge of not only the shopping habits, but also the mindset of the average American during the economic recovery.
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But predicting holiday spending is never easy. Take last year's holiday period. Overall sales were strong, but sales don't tell the whole story: Retailers' profits were eroded because they had to do a lot of discounting to get shoppers to spend, particularly during the final weeks before Christmas.

And all the economic variables that will likely have an impact on this year's shopping season make predicting sales that much more difficult. Among them, the worry that the U.S. economy will fall off into another recession next year. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget deal.

Retailers and economists are hoping history doesn't repeat itself. The last time there was such a budget battle, in August 2011, it ended with the country losing its top credit rating, nervous investors fleeing the stock market, and shoppers taking a break from buying.

Still, Americans are more optimistic than they have been in a long time. Consumers' confidence rose to a seven-month high in September even as the unemployment rate has been stuck at around 8 percent, according to the Conference Board. Gallup Poll, which tracks consumer confidence daily, also registered a pickup in confidence last month to the highest level since May. The upcoming presidential election seems to be having an impact on how shoppers' view the economy, economists say.

Adding to that, Americans have seen their stock portfolios grow as The Standard & Poor's 500 stock index has surged more than 15 percent this year. And national home prices were up in July 1.2 percent compared to the same month last year, according to the Standard & Poor's/Case Shiller index released last week. That's the second straight year-over-year gain after two years without one.

Still, some economists question whether the higher level of confidence among Americans is sustainable. Confidence has been bouncing around since the recession and the current level is still well below what's considered healthy. Moreover, the spike in confidence has yet to translate into a surge in spending.

"You have to be confident to spend, but because you're confident doesn't necessarily mean you'll spend," said Dennis Jacobe, chief economist at Gallup Poll.

For their part, retailers already are being cautious. John Challenger, CEO of Challenger, Gray & Christmas, says retailers are expected to increase holiday hiring by 6 percent to about 700,000 for the October through December period compared with a year ago, when that figure was 660,200. That's well above the 324,900 hired during the financial meltdown in 2008, but still below the 746,800 level in pre-recession 2006, and well under the nearly 850,000 seasonal workers hired during the height of the dot.com boom in 1999. NRF predicts merchants will hire between 585,000 and 625,000 seasonal workers for the holidays. That's in line with last year's 607,000, according to the trade group's measure.

And they're already starting to offer enticements to lure holiday shoppers. Kmart, a division of Sears Holdings Corp., Toys R Us and Wal-Mart Stores Inc. have announced last month they're either lowering or waiving the upfront services fees for their interest-free pay-over-time program. All three said the moves were in response to complaints from shoppers.

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