Will Black Friday save the economy?
(MoneyWatch) "I hate to eat and run, but a door-buster awaits!" As if Black Friday and Cyber Monday were not enough, this year Wal-Mart, Sears, Toys R Us and Target will open for business on the evening of Thanksgiving. Retailers and economists alike are hoping that consumers give thanks by opening their wallets this week.
The National Retail Federation predicts holiday sales will increase 4.1 percent this year to $586.1 billion. Actual holiday sales in 2011 grew 5.6 percent, better than the 10-year average annual growth rate of 3.5 percent. Additionally, shop.org expected online holiday sales to grow 12 percent over last holiday season to as much as $96 billion. To prepare for the potential uptick in sales, retailers are expected to hire between 585,000 and 625,000 seasonal workers this holiday season, comparable to the 607,500 seasonal employees they hired last year.
All eyes are focused on U.S. consumers this holiday season, because businesses are sitting on the sidelines, awaiting the outcome of the "fiscal cliff" negotiations; and government spending is off the table, as debt and deficit reduction have taken center stage. Not to put too much pressure on consumers, but it is also likely that the areas affected by Sandy will need the rest of the country to pick up the slack, as the storm's recovery process continues. Retail sales fell in October by the steepest amount since June, hurt in part by the effects of Sandy.
As one trader remarked last week, "I never thought I would say it, but 2 percent economic growth feels like a miracle right now." Indeed, the rest of the world makes the U.S. seem like an economic power house. Last week, we got word that the 17 nation eurozone economy has fallen back into a recession. Third quarter GDP contracted by 0.4 percent on an annualized basis, which follows a 0.7 percent decline in the second quarter. The ECB expects the region to grow by only 0.1 percent all of next year.
The eurozone recession is already being felt across the globe, and the world's major exporters are taking the biggest hits. The Chinese economy, which counts Europe as its largest trading partner, has seen growth slow to 7.4 percent; Japan is on the verge of recession, if not already there (Q3 GDP contracted by 3.5 percent annualized); India's economy is growing at its slowest pace in nearly a decade and Russia's Q3 GDP expanded at its slowest rate in more than two years. These problems have hit home: The global pullback has hammered U.S. manufacturing and industrial production, which slowed to a crawl over the summer and has seen job creation stall as a result.
One area that could help the ailing economy is housing. This week and next, there will be fresh reports that are likely to show the housing market is showing signs of life. The recovery in housing should start to make a direct impact on the economy via construction of new homes, improvements and alterations, and broker commissions on sales of new and existing homes.
In case you are keeping score, stocks have stumbled of late. The Dow is down 7.5 percent from 2012 highs (closing high was 13,610 on 10/5), the S&P 500 is off 7 percent from 2012 highs (closing high was 1,465 on 9/14); and the NASDAQ and is now down 10 percent from 2012 highs (closing high was 3,183 on 9/14), officially in correction territory. Try not to blame the entire autumn stock market swoon on the fiscal cliff. With earnings season almost complete, it's noteworthy that Q3 was the worst quarter for corporate profits in 3 years.
-- DJIA: 12,588, down 1.8 percent on week, up 3 percent on year (4th consecutive losing week)
-- S&P 500: 1,359 down 1.5 percent on week, up 8.1 percent on year
-- NASDAQ: 2,853 down 1.8 percent on week, up 9.5 percent on year (6th consecutive losing week, worst streak in 3 years)
-- January Crude Oil: $85.41
-- December Gold: $1,714.70
-- AAA Nat'l average price for gallon of regular gas: $3.42 (down $0.32 from month ago)
THE WEEK AHEAD:
Mon 11/19:
10:00 Existing home sales
10:00 Home market index
Tues 11/20:
8:30 Housing Starts
Weds 11/21:
7:00 MBA mortgage purchase applications index
9:55 Consumer sentiment
Thurs 11/22: U.S. MARKETS CLOSED - THANKSGIVING
Fri 11/23: STOCK MARKETS CLOSE 1 PM