Shoppers spent more than they planned during the Christmas season, giving retailers a much-needed sales spurt that industry watchers are hoping will continue this year.
Consumers spent an average of $811 on holiday gifts, significantly more than the $699 they initially planned to spend, according to a Consumer Reports survey expected to be released today. About 4 in 5 consumers bought gifts, and in a good sign for discretionary spending, many shoppers bought for themselves, the poll found.
That has helped lift retail projections for 2010, with many economists saying they expect modest gains.
In a separate report also expected to be released today, the National Retail Federation estimated that retail sales would increase 2.5% from last year. In comparison, industry sales last year fell 2.5% from 2008, the group said.
"As we continue to see signs of improvement throughout the U.S economy in 2010, overall sentiment will begin to lift, making way for slight increases in consumer spending," said Rosalind Wells, chief economist for the retail federation. "While we still expect shoppers to continue to be frugal with their discretionary spending, retailers will soon be able to reap the benefits of leaner, smarter inventories and a year and a half of pent-up consumer demand."
The group said other positive economic contributions would come from trade, especially strong exports, a turnaround in the inventory cycle and government spending.
The Consumer Reports survey, which polled 1,023 respondents from Jan. 7 to Jan. 10, also found that 47% of shoppers used credit cards to pay for all or some of their holiday purchases, with those shoppers spending an average of $896. Consumers who charged the most were from households earning $100,000 or more ($1,570), shoppers in the West ($990) and men ($902).
Brent Schoenbaum, a retail partner at Deloitte & Touche in Los Angeles, said he was waiting to see if recent trends were sustained or only temporary.
"I think there's certainly an expectation that the worst is behind us," he said. "But there's still a lot of head winds for companies."
Analysts caution that spending levels are still well under what they were before the recession and say that until the economic picture significantly improves, consumers will probably continue to spend with caution.
"We think it's still going to be a very choppy year," said Betty Chen, a retail analyst at Wedbush Morgan Securities. "Similar to last year, we're going to see consumers turn out for holidays or peak shopping days and then we're going to have, in between that, some big lulls."
At Kohl's Corp., Chief Executive Kevin Mansell said the mid-priced department store chain was prepared for "more of the same" in terms of shopper spending this year.
"I think the impact on our consumers is pretty clear: They tell us that they have less to spend, so what they spend they need to stretch further," Mansell said.
A better picture of retailers' 2010 expectations will come next month, when several major chains report fourth-quarter earnings and share projections for the year.