WASHINGTON — Consumers spent a lot over the holidays and should keep it up this year. Economists say that will embolden companies to expand and hire.
Americans spent more in the 50 days before Christmas than retail analysts expected. Spending grew at the fastest rate since 2006 — the surest sign yet that consumers are becoming less frugal as the economy rebounds.
“It has been the consumer that has been afraid to spend that has held the economy back and held businesses back from hiring,” said Joel Naroff of Naroff Economic Advisors. “That cycle is beginning to break.”
Normally in January, shoppers pull back. But they’re not likely to this year. Economists say the tax cuts approved by Congress, a rising stock market, a slow but steady rise in hiring and growing willingness by banks to lend will sustain spending by consumers.
“I don’t think consumers are going to suffer a hangover after Christmas,” said Mark Zandi, chief economist at Moody’s Analytics. “They are going to hang tough and spend more aggressively in 2011.”
Zandi said consumer spending will rise 3.6 percent in 2011, twice as fast as in 2010. That would propel the economy to grow about 4 percent, up from the 2.8 percent Zandi expects for 2010. The government’s report on fourth-quarter growth for 2010 comes out this month.
Other economists expect economic growth closer to 3.5 percent this year.
Excluding auto sales, holiday shopping in the 50 days before Christmas totaled $584 billion, according to MasterCard SpendingPulse. That was 5.5 percent more than in 2009 — the biggest increase since 2006.
