US holiday spending surges to 12-year high, helped by tax cuts (VIDEO)

Christmas decorations are seen as people shop at Brookfield Place in Lower Manhattan in New York. ― Reuters pic
Christmas decorations are seen as people shop at Brookfield Place in Lower Manhattan in New York. ― Reuters pic

CHICAGO, Jan 13 ― US holiday spending jumped 5.5 per cent ― its biggest gain since 2005 ― spurred by stronger employment, rising consumer confidence and expectations of higher wages and bonuses after the recent tax bill, the National Retail Federation said yesterday.

Sales in November and December rose to US$691.9 billion (RM2.74 trillion), compared with US$655.8 billion the previous year, excluding sales at restaurants, automobile dealers and gasoline stations. The NRF previously forecast sales would rise 3.6 to 4 per cent for the period. Holiday sales can account for up to 40 per cent of annual sales for some stores.

While strong sales were widely expected, many retailers were particularly hungry to prove themselves this past holiday season, following a year marred by tumbling stock prices, management shakeups, a slew of store closures and several industry bankruptcies.

The Dow Jones Retailers Index was up 1.5 per cent yesterday afternoon, led by jumps in the stock prices of Amazon.com Inc, Target Corp and Wal-Mart Stores Inc, among others.

NRF Chief Economist Jack Kleinhenz said a number of factors contributed to surging consumer confidence including a pickup in income, a rising stock market, unemployment levels at 17-year lows and the timing of the tax cuts.

“When that got passed and companies started to announce bonuses and wage increases, the consumer felt very much more at ease going into the holiday season and spending,” Kleinhenz said in an interview, adding the possible tax cuts had not been accounted for in the NRF's forecast.

Several large US employers, including Walmart, American Airlines Group Inc, AT&T Inc and Wells Fargo & Co, have announced employee bonuses or wage increases after US President Donald Trump's tax overhaul in December cut the corporate tax rate to 21 per cent from 35 per cent.

Kleinhenz also said retailers had the right mix of inventory, pricing and staffing to help connect with shoppers.

Struggling with competition from Amazon and off-price stores, traditional retailers have worked hard to address changing consumer habits by lowering prices, sprucing up physical stores and websites and improving delivery options. ― Reuters

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