Tuesday, December 26, 2006

Holiday Sales Increase 3%

From Bloomberg:

U.S. holiday retail sales rose a disappointing 3 percent from 2005 as a slowing housing market and higher energy costs cut into spending, MasterCard Advisors said.

The gain is less than the 5.2 percent increase last year and the smallest growth since the survey started in 2003, MasterCard Advisors said today in a statement. Electronics and luxury goods had the strongest sales, according to the company's SpendingPulse survey.

``Retailers are going to find that this was a pretty modest Christmas season,'' Britt Beemer, chairman of Charleston, South Carolina-based America's Research Group, said in an interview.

This report is not good news. Retailers make about 1/3 of their profits during the Christmas season. This also does not bode well for the coming year. Consumer spending comprises 70% of US GDP growth. If the consumer starts to spend less, we'll have a second negative hit to GDP growth -- the first being housing.