Americans splurge as the news worsens

By Stephen Foley
Wednesday 29 December 2010 01:00

US shoppers spent more on Christmas this year than at any time since the start of the recession, despite their misgivings about the economic outlook and gathering fears of a double dip in the American housing market.

Individual retailers will begin publishing official trading figures next week, but a slew of surveys of in-store activity showed that the holiday period was a barnstormer, including a 5.5 per cent increase in sales according to the Mastercard SpendingPulse survey.

The sales figures provided the only bright spot in the post-Christmas data, which yesterday showed national house prices falling again and consumer confidence registering an unexpected drop.

American shoppers appeared to put aside economic concerns for a few festive weeks, splurging even on luxury items. Jewellery sales were up 8.4 per cent in the 50 days to Christmas Eve compared to the same period last year, Mastercard said. Luxury goods sales increased 6.7 per cent. Clothing sales were up 11.2 per cent on last year.

A second survey, the Johnson Redbook retail sales index, showed a year-on-year increase in sales of 3.6 per cent to 25 December. Christmas spending has now rebounded to levels last seen in 2007, clawing its way back from the big drop of 2008, when the collapse of Lehman Brothers was fresh in the memory.

At the same time as spending more, though, consumers told interviewers that they were less optimistic about the economic outlook, and particularly about the strength of the jobs market.

The monthly Conference Board index of consumer confidence fell to 52.5 in December from 54.3 in November.

And there was more worrying news from the housing market yesterday, with the Case-Shiller index – which measures house prices in 20 metropolitan areas and is seen as the best indicator of the national housing market – showing a 0.8 per cent annual drop. The data refers to house sales in October.

Six cities, reaching from Seattle in the North-west to Miami in the South-east, set new lows for average house prices, which first began falling in 2006. Tax breaks to encourage first-time buyers into the market expired earlier this year and were not renewed by Congress.

David Blitzer, chairman of S&P's index committee, which publishes the Case-Shiller, said: "The double dip is almost here. There is no good news in October's report."

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