Women carry shopping bags on Monday as they walk past a French Connection UK store in San Francisco. Experts say that even if holiday sales exceed expectations, the broader recovery is expected to remain weak for a while.AP photo
WASHINGTON — Don’t count on holiday shoppers to fuel the economic recovery.
Sales this time of year are vital to retailers, of course. But they’re not nearly enough to drive the economy.
Even if holiday sales exceed expectations, the broader recovery is expected to remain weak — for the rest of the year and beyond.
Holiday purchases make up a surprisingly small share of the economy. Last year, gift sales were estimated to account for less than 13 percent of the fourth quarter’s gross domestic product. And Mark Zandi, chief economist at Moody’s Economy.com, thinks they’ll account for about the same share of this quarter’s GDP — the value of all goods and services produced in the United States.
Usually as recoveries begin, the economy roars to life as pent-up spending is lavished on cars, clothes, homes and appliances. Consumers become an engine of economic strength.
Not likely this time.
With credit tight and joblessness high, no one expects shoppers to provide enough punch to power the recovery.
The government’s surprisingly strong retail sales report for November — and a decent holiday season — could turn out to be a last hurrah.
“Despite the glimmer of optimism on the surface ... the economic fundamentals are weak,” said Sung Won Sohn, economist at California State University’s Smith School of Business.
The economy isn’t usually this weak early in recoveries.
After the severe 1981-82 recession, for instance, consumer spending rocketed at a 7.5 pace in the last quarter of 1982, when the recovery began. It averaged a robust 6.5 percent quarterly growth in 1983. And the economy surged at a blistering quarterly pace of nearly 8 percent that year.