Americans look to be in the mood to shop this holiday season as their buying power gets a lift from more plentiful jobs and cheaper gasoline.
Consumers spent at the fastest pace in three months in October, snapping up everything from clothing and electronics to sporting goods and restaurant meals. Economists, surprised by the spending strength, said the momentum will carry into year-end.
“Consumers are marginally better off,” said Thomas Simons, a money-market economist at Jefferies LLC in New York. “We have been adding more jobs, and while wages are somewhat flat, people who were earning nothing before are earning something now.”
Such resilience may mean the most dire predictions for the holiday-shopping season will be unfulfilled, providing relief to retailers from Macy’s Inc. to Best Buy Co., which have warned they will aggressively discount merchandise to boost sales. Economists at Morgan Stanley and JPMorgan Chase & Co. are among those forecasting consumer spending will pick up from its weakest performance in more than two years, helping the economy grow even as companies reduce production to work off bloated inventories.
“We think that rise, along with improved consumer fundamentals, indicate further gains later in the quarter,” Peter D’Antonio, an economist at Citigroup Global Markets Inc. in New York, said in a research note.
Sales of holiday-inclined merchandise, such as apparel, furniture and consumer electronics, will increase by 4.9 percent in 2013, according to West Palm Beach, Florida-based FTI Consulting Inc. While the growth is average by historical standards, “we suspect most retailers will be pleased,” retail analysts led by Bob Duffy wrote in a recent report.
Improved consumer outlooks on joblessness combined with gains in home values and financial assets should brighten the moods of shoppers, although income growth is needed to further support discretionary spending. Last month’s federal government shutdown and other political infighting should have only a minimal effect on holiday sales.
Payrolls have climbed by an average 186,300 workers a month this year, compared with 172,700 at the same point last year. Gasoline prices are near their lowest levels since February 2011, stocks are at all-time highs and home prices are climbing by the most since 2006.