Will Holiday Spending Boost The U.S Economy?

Investors are returning to work on Monday morning looking ahead to a shortened trading week that will see the U.S. market closed on Thursday due to Thanksgiving,  a national holiday, followed by an early shut down of the market at 1 p.m. EST on Friday.

Last week the S&P 500 was down 1.5 percent, marking a second consecutive week of losses.

The Dow dropped 1.8 percent, the fourth week of losses while the Nasdaq lost 1.8 percent, the sixth week of losses.

Concerns about the upcoming “fiscal cliff” along with uncertainty about increased taxes, government spending cuts, and slower growth in the global economy have scared many investors away from investing equity markets. 

U.S. equities rebounded last Friday following a report that U.S. political leaders in Washington D.C. were in advanced talks to replace sweeping spending cuts with targeted cuts and tax increases.

This week those budget negotiations are expected to resume over the looming “fiscal cliff” while President Obama meets with leaders across Asia and Congress is in recess.

U.S. Retailers

U.S. retailers are gearing up for the biggest shopping day of the year on Friday, a day that is known by the retail industry as “Black Friday” which can represent anywhere between 20–40% of annual sales, according to the National Retail Federation.

Retailers are hoping that U.S. consumers will still have an appetite for spending during the holidays while faced with the added possibility of seeing higher tax increases in 2013 across certain segments of the U.S. population (wealthiest).

They are also coming to terms with the reality that in late 2012 some communities across the U.S. northeast will be re-adjusting their spending habits following the devastating impact of Hurricane Sandy.

Figures From The National Retail Federation

According to the National Retail Federation,  the NRF is projecting 2012 holiday sales to rise 4.1% from 2011.

If their estimate is correct, holiday sales for 2012 would be $586.1 billion.

Previous data from the National Retail Federations shows that in 2011, holiday sales increased 5.6% to $563 billion, which was only slightly higher than the 5.5% increase in 2010.  

On average, holiday sales have increased 3.5% per year for the last 10 years. This includes expectations for 2012.

For 2012 the National Retail Federation estimates that retailers will hire between 585,000 and 625,000 seasonal employees, compared to the 607,500 they hired last holiday season and more than the 563,000 they hired in 2010.

The National Retail Federation counts the total retail industry sales from November and December, 61 days in total, to determine holiday sales.



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