The holiday season is no time for consumers to turn crotchety, but so far a jubilant mood has been slow to emerge. Blame three hurricanes and soaring costs for home heating and gasoline, among other factors.
As this point, economists are wondering whether Americans will make their usual year-end splash with credit cards, or whether some will sit on their hands. Clues arrive Tuesday, with a report on November retail sales.
Economist Eugenio Aleman of Wells Fargo & Co. in Minneapolis is looking for a gain of 0.5 percent, more than reversing a drop of 0.1 percent in October.
“With a slowing housing market, the economy is expected to be supported by a strong, albeit weakening, consumer market” in the months ahead, said Aleman.
The key to spending, he said, will be the cost of filling your tank.
“Much of the success of this holiday season will be tied to the direction of gasoline prices, which have returned some of the purchasing power to consumers during the last month,” Aleman said.
His bottom line: Fuel costs “could further take some steam off if they reverse the trend during the last weeks of the year.”
Other news to watch this week:
– As members of the Federal Reserve gather Tuesday for a policymaking session of their Open Market Committee, opinion is nearly unanimous that they will engineer another rate increase, the 13th in less than 18 months. Chicago economist William Hummer says it is a near certainty that the central bank will boost its short-term-lending barometer to 4.25 percent. He is looking for another quarter-point rate increase in late January, when Fed Chairman Alan Greenspan exits the scene. “Two more rate increases are baked into the cake, but it’s not certain what will take place once the rate hits 4 1/2 percent,” said Hummer, of Wayne Hummer Investments.
– The stock market’s year-end rally has been one of fits and starts, but the profit outlook remains solid because “post-Katrina the economy has regained momentum,” said Chicago investment manager Marshall Front. Looking ahead to 2006, the wild card remains housing, he said, with many experts predicting an end to the real estate boom.
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