Oct 20, 2009

Signs building that holiday retailing will be brighterBy Cotten Timberlake and Rich MillerStatesman.com

Washington — From Intel Corp. to TJX Cos., the outlook for the U.S. retail holiday season is becoming more optimistic.

Intel, the world’s biggest chipmaker, cited stronger consumer demand in projecting that its sales in the fourth quarter would be higher than analysts had predicted. TJX, which owns the T.J. Maxx and Marshalls discount chains, raised its fourth-quarter comparable-sales estimate to a gain of 3 percent to 5 percent from an increase of 2 percent to 4 percent.

“Consumers’ bunker mentality is gradually giving way to more familiar spending patterns,” says Michael Feroli, a former Federal Reserve official who is now an economist at JPMorgan Chase & Co.

Rising sales would be good news for the economy as well as retailers. Consumption accounts for about 70 percent of gross domestic product, and more spending would help the recovery.

“Retail sales offer the most encouraging sign of a more lasting turn in activity,” Robert DiClemente, chief U.S. economist at Citigroup Global Markets, said in a note to clients last week.

DiClemente said he foresees the economy growing about 2.75 percent in the second half of this year and about 3.25 percent in 2010.

Helping to drive the improvement in consumer spending is a rebound in household wealth, which increased $2 trillion in the second quarter and about that much again in the third, according to Steven Wieting, managing director of economics and market analysis at Citigroup Global Markets.

Retail sales, excluding automobiles and restaurants, might advance as much as 1.5 percent in the holiday season as “frugal fatigue” sets in and shoppers open up their wallets, says Marshal Cohen, chief industry analyst for the NPD Group, a market research firm.

In 2008, sales dropped 4.2 percent during what the International Council of Shopping Centers said was the worst holiday season in four decades. The fastest growth since 2000 was 5.9 percent in 2005.

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