Moody's Economy.com sees better retail sales ahead

U.S. retailers are in for a better holiday shopping season this year as the economy improves, Moody's Economy.com Chief Economist Mark Zandi said on Monday.

Zandi, who said the economy's improvement would pick up speed this year, forecast sales for the 2010 holiday season would rise 3 percent to 4 percent, an improvement from 2009.

"We're going to be pleasantly surprised by Christmas 2010," Zandi said at a National Retail Federation conference in New York.

He added that improving sales trends in 2010 would prompt U.S. retailers to begin hiring more employees.

U.S. retail sales in November and December 2009 rose 1.7 percent, according to data released on Monday by ShopperTrak, boosted by a post-Christmas surge that made up for sales lost from a massive East Coast winter storm.

ShopperTrak, whose data exclude online sales, had forecast sales would rise 1.6 percent.

Pent up demand and a better economic environment are paving the way for U.S. retail sales to keep up their momentum in 2010, said ShopperTrak co-founder Bill Martin.

"The consumer has been in hiding and can't wait to get out there," Martin told Reuters in an interview.

Martin said the first few days of 2010 were promising, although he cautioned that sales had a long way to go to catch up to the pre-recession levels of 2006 and 2007.

For November, ShopperTrak found that U.S. foot traffic fell 2.9 percent and that sales were flat despite a strong showing on Black Friday, the day after U.S. Thanksgiving that marks the beginning of the holiday shopping period.

December sales were up 3.8 percent as shopper spending in the days immediately before and after Christmas helped make up for lost sales during the December 19 winter storm that battered the U.S. Eastern seaboard and kept shoppers at home.

The U.S. government is set to release December retail sales data on Thursday.

CLOUDS ON THE HORIZON

Zandi sounded a note of caution, saying the current U.S. debt to gross domestic product ratio of 65 percent was "barely manageable." That could threaten the overall economy's health and curb consumer spending longer term.

A value added tax on consumer goods is the most efficient way for the government to raise money, Zandi said, but conceded it could hurt retailers.

"Pick your poison," Zandi said, predicting there would eventually be a VAT tax in the United States, as there is in most other advanced economies.

Zandi said consumers still have a lot of debt to pay down before they can ramp up their shopping again and banks are willing to lend again.

"Most of the drag of the credit crunch is now," he said. "Once consumers deleverage in two years, spending will pick up."

In the meantime, Zandi said U.S. retailers would have to sell more products to emerging markets to sustain their growth.

Claim Your Free Book "Make Real Money On The Internet"