TERRE HAUTE — The Grinch may stay in his cave this Christmas.
Rose-Hulman Institute of Technology economics professor Dale Bremmer, in a paper titled “Will the Grinch Steal Christmas Once Again this Year?,” predicts American consumer spending will increase this holiday season compared with last year.
“My model predicts a better Christmas,” Bremmer said Wednesday afternoon in his office at Rose-Hulman. And this could be good news for the prospects of an economic recovery. “We probably won’t get out of this recession” without stronger consumer spending, he said.
Using a statistical model based on 30 years of data, Bremmer believes — when the dust has settled — nationwide sales of consumer goods will have been noticeably greater in November and December this year compared with the same months in 2008.
According to the model, December spending on non-durable consumer goods will increase 6.6 percent over last year while durable goods spending will increases 7.6 percent. The model also predicts greater spending in both categories for November.
While these figures would be an improvement over last year, they are still worse than the consumer spending figures of 2007, Bremmer noted. “You still see the recession,” he said.
To calculate his forecast, Bremmer uses monthly data recorded by the federal government in five categories: consumer spending on both durable and non-durable goods, disposable personal income, the unemployment rate and consumer confidence. While some may criticize the model for not including more, his predictions are basically in agreement with others, he said. UPS, FedEx and the International Council of Shopping Centers all are expecting greater holiday shopping this season, he said.
Bremmer believes his model is useful for forecasting spending patterns a few months into the future. And, so far, early reports of holiday shopping indicate he may be on track. Compared with last year, stores reported Black Friday/Thanksgiving weekend sales were up 1.6 percent over last year and online retailers reported a jump of more than 5 percent on “Cyber Monday” after the Thanksgiving weekend, news reports indicate.
Of course, the picture this season remains far from rosy, Bremmer notes. Millions of jobs have been lost, unemployment remains near 10 percent and the recession is now two years old. Yet there are reasons for optimism. The stock market, after hitting bottom, seems to be recovering, new claims for unemployment benefits are at their lowest level in a year, GDP is growing and consumer confidence is on the rise, he said.
Still, whatever happens this holiday season, Bremmer’s advice always remains the same: Live within your means, be careful with your credit card spending and remember to watch the movie “It’s a Wonderful Life.” The classic film “reminds us that hard work, a sense of community, faith in each other, ingenuity and entrepreneurship can overcome a weak economy and fragile banking system,” Bremmer concludes his paper. Most importantly, Bremmer adds, “spend time with family and friends and remember the reasons behind the season.”
To read Dale Bremmer’s complete paper, see the Inside Indiana Business Web page at insideindianabusiness.com.
Arthur Foulkes can be reached at (812) 231-4232 or arthur.foulkes@tribstar.com.
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