Resilient U.S. shoppers offer holiday hope to retailers

Less Traffic

Coach Inc., the largest U.S. luxury handbag maker, said mall traffic plunged in the first two weeks of October, turned upward in the second half of the month, and then saw “sharp declines” in November.

“Obviously there is a lot of concern out there,” Andrea Resnick, senior vice president for investor relations, told investors at a Morgan Stanley & Co. conference yesterday. “It seems to be a very fragile and volatile consumer environment.”

Consumer confidence sank to a one-year low in early November as households were discouraged by the government shutdown and has regained little ground since, according to the Bloomberg Consumer Comfort Index. The index fell last week following its first gain in almost two months.

A report yesterday showing that company stockpiles rose 0.6 percent in September, twice the median forecast of economists surveyed by Bloomberg, indicates the pickup in consumer spending may not help boost economic growth this quarter. A gain in holiday sales may be met by drawing down on unwanted stockpiles rather than increased production.

Economic Growth

Tracking estimates by economists at Macroeconomic Advisers in St. Louis yesterday put third-quarter growth at 3.3 percent, up from the government’s initial estimate of 2.8 percent, mainly because of the buildup in stockpiles. Growth this quarter is running at about 1.3 percent, they said.

Nonetheless, the gain in October retail sales heartened some economists. The stronger-than-expected results prompted Morgan Stanley to boost its tracking estimate of consumer spending for the fourth quarter to 2.5 percent from 2 percent. Purchases are “slightly above” JPMorgan Chase’s 2 percent projection, its analysts said.

That’s an improvement from the 1.5 percent gain in the third quarter, which was the weakest since the three months ended June 2011, according to Commerce Department data.

The fact that consumers kept spending in the face of the spats in Washington bodes well for the economy, said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. Even with unanswered questions about new health care regulations, the debt ceiling debate and the government shutdown, Americans didn’t flinch, he said.

“Consumers are facing potential chaos, and in spite of all the reasons not to spend money, they did,” said Naroff. “They didn’t translate the noise in Washington into negative things for themselves. They showed a lot of intelligence.”

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