Retail Uptick Could Signal Recovering Housing Market

The U.S. ended 2010 with a bang, when consumer spending rose 3.5 percent – the best performance since a 5.2 percent rise in 2007, before the recession began.

Consumer spending rose 0.7 percent in December, the sixth straight monthly increase, the Department of Commerce reported today.

Households saw their incomes increase 0.4 percent – unchanged from November – but growing at the second-lowest annual pace in the eight years.

The savings rate dipped slightly to 5.8 percent from 5.9 percent in 2009, but was still well above the low of 1.4 percent hit in 2005 – at the height of the housing boom when rising home prices encouraged Americans to spend more.

What impacts retailers impacts neighborhoods. And that, in turn, impacts the housing market – they’re all linked together, the Martha & Robert Fogelman Family Chair of Excellence in Sustainable Real Estate at the University of Memphis Grant Thrall told The Memphis News in December.

“Consumer confidence means almost everything to consumption in the United States,” Thrall said. “They feel confident that they are not going to be worse off in the future, so they can now go back to enjoying consumption as before.”

As consumer spending accounts for 70 percent of total fiscal activity, economists forecast a gradually improving job market and a payroll tax cut to boost spending further in 2011.

The big question remains – will the gains in consumer spending will be enough to offset weakness in the housing market and further cutbacks in government spending?

For all of 2010, the economy grew 2.9 percent, the best performance since 2005, and a sharp contrast to the 2.6 percent drop in GDP in 2009 – the worst decline in more than 60 years.

The Associated Press contributed to this report.

Comments

  1. talktotennessee says:

    Nothing could be less true than your headliner. An increase in Holiday spending in December does not signal recovery in the housing market. Wishful thinking. The housing market is still dropping with significant REO sales at discounted prices dominating market activity. Although interest rates are low, credit is tight. Inventory is increasing in a declining market. Only pockets of housing enjoy continued appeal or marketability. New construction is a fraction of what it was in the bubble. Agents are dying on the vine locally, dropping like flies. Consumer spending bears examination of what and where people are directing their money. It isn't in housing.

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