The government released disappointing consumer data this week, underscoring how many Americans are still carefully scrutinizing expenditures amid a tepid economic climate, and how stores are battling to entice them to spend.
Consumers flocked to retail stores at the start of the holiday shopping season, driving record sales. Retailers aggressively reduced prices and many opened their stores on Thanksgiving evening, helping to drive traffic. With Americans carefully considering every purchase, they flocked to companies such as Target ( TGT ), Best Buy ( BBY ) and Walmart ( WMT ), which slashed prices in an effort to drive sales.
The aggressive cost-cutting measures, however, will likely crimp margins at major retailers unless sales are robust. The Commerce Department said on Friday, however, that personal spending in November climbed 0.1 percent, likely the result of a 0.1 percent decline in wages and salaries. The Commerce Department said that durable goods orders surged 3.8 percent last month, but analysts said such a torrid pace of growth would not likely to carry over to 2012.
Though slight, the uptick in personal spending indicates Americans are still shopping, which is positive news for the U.S. economy , as a significant portion of GDP derives from consumer consumption. On the other hand, economists worry jittery Americans significantly retrenched in December, as a number of national retailers have unleashed aggressive last-minute deals in the lead-up to the Christmas holiday. They typically do not do so until after Christmas, but the huge discounts stores are offering has prompted analysts to speculate as to whether retailers are sitting on mountains of inventory .
Retailers, including Ann Taylor, Gap and Abercrombie & Fitch, among many others, are offering discounts this week ranging from 40 percent to 60 percent. Such steep price reductions are historically implemented in the weeks following Christmas, but stores are offering them on nearly every item, which experts said indicates sales were not as brisk as they had anticipated.
Last-minute shoppers are reaping the benefits of the steep discounts, and retailers are willing to accept a slide in profits in exchange for a jump in revenue. Still, as the end of a trying year looms, consumers and retailers alike are dreaming of a white Christmas - and an economic boom in 2012.
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