6 reasons retailers expect a happy holidays

After suffering through years of thin sales following the housing crash, retailers are expecting to finally hit the holiday jackpot.

Although economic growth in the last three months of the year is expected to be modest, the consensus among forecasters is clear: Americans are going to hit the stores hard this holiday season. In fact, many have already started.

Their increased spending this holiday should help keep the recovery on track, if not kick into overdrive. The wheels may be coming off Europe's economy, China is slowing down and Russia is getting squeezed by sanctions, but no matter. Americans are opening their wallets, and retailers are already revving up to grab a share.

Walmart (WMT), Target (TGT) and Amazon (AMZN) began rolling out the holiday sales offers weeks ago. Walmart earlier this month unveiled a number of deals that it typically reserves for Black Friday and Cyber Monday.

This doesn't mean that the U.S. economy is healed -- far from it. In fact, many Americans are of two minds this holiday. On one hand, they don't trust the economic recovery and they're unsure about where the country is headed. That much was apparent in the recent midterm elections. On the other hand, they're feeling better about their personal finances, at least to the point where they are likely to spend more on gifts.

Economists think sales could rise as much as 4.5 percent from the last holiday season. "The household sector as a whole is in a better position now than it has been for many years," said Paul Dales, senior U.S. economist for Capital Economics, in a research note.

Read on for six reasons retailers are expecting to clean up this holiday.

Gasoline prices are down. Cheaper gas is putting extra cash back into household budgets, and studies show that people are spending that money, not saving it. Economists at PNC Financial Services Group estimate that tumbling gas prices have put $39 billion in extra cash into holiday shoppers' budgets this year compared to last year.

Americans spent a lot in October. Retail sales rose 0.3 percent in October. While that may not seem that impressive on its face, it's a vast improvement from September sales, which fell 0.3 percent. When you exclude gas purchases, retail sales were up 0.5 percent. Spurred on by cheaper gas prices, shoppers also spent a lot on cars -- automakers had their strongest October sales in years last month.

Shoppers are increasingly confident. Consumer sentiment is at an eight-year high. The Thomson Reuters/University of Michigan sentiment index rose to 89.4 in early November. The long-term average for consumer confidence is 85.

The jobs picture is improving. U.S. businesses have added an average of about 230,000 jobs a month this year, helping to bring the unemployment rate down to 5.8 percent, its lowest level in more than six years. These may not be the highest-quality jobs -- lower-paying positions have dominated the economic recovery -- but 2.7 million more Americans are employed going into this year's holidays.

Wages are growing, though slowly. The average weekly wage grew by 2.8 percent in October. It was the fourth month in a row that hourly wages grew at a rate of more than 2.5 percent for production and non-supervisory workers.

The stock market remains hot. Stock prices are up some 13 percent, boosting the fortunes of the wealthiest Americans. Lower-income households are less likely to own stocks, and haven't benefited as much from the market's rise.

  • Kim Peterson

    Kim Peterson is a financial journalist covering business and the economy. She has written for several online and print publications, including MSN Money and The Seattle Times.