Shop­pers prov­ing re­silient in slump


Austin American-Statesman - - BUSINESS - Con­tin­ued from B

val­ues are ris­ing, leav­ing fewer Amer­i­cans on the brink of fore­clo­sure and help­ing many feel more fi­nan­cially se­cure.

Above all, they point out, there is noth­ing per­ma­nent about the “fis­cal cliff,” a set of tax hikes and spend­ing cuts that will au­to­mat­i­cally take ef­fect at the be­gin­ning of 2013 if law­mak­ers are un­able to reach a deal to avert it.

When the fis­cal is­sue is ad­dressed and de­mand bounces back, th­ese con­trar­i­ans ar­gue, bea­t­en­down re­tail stocks may turn out to be this year’s best af­ter-Christ­mas bargain.

“There may be some cau­tion ahead of the fis­cal cliff” be­cause of un­cer­tainty about tax rates, “but it’s more of a road bump than any fun­da­men­tal weak­ness,” said David Kelly, chief global strate­gist for JP Mor­gan Funds.

The fis­cal cliff isn’t the only rea­son con­sumers slowed down in Novem­ber and De­cem­ber. Amer­i­cans were buf­feted by a se­ries of events, mostly tem­po­rary, that made them more likely to stay home.

By Christ­mas Day, the re­sults were in: Spend­ing in key re­tail cat­e­gories in­creased only 0.7 per­cent, just a frac­tion of the 3 per­cent to 4 per­cent that many an­a­lysts had ex­pected, ac­cord­ing to MasterCard Ad­vi­sors Spend­ingpulse, a mar­ket data provider. It was the worst year since 2008, when the crest­ing fi­nan­cial cri­sis had dragged the econ­omy into a deep re­ces­sion.

In­vestors didn’t wait for the re­sults from spe­cific stores, which will add de­tail to the pic­ture when they are re­leased in early Jan­uary.

They pushed down re­tail­ers in the Stan­dard & Poor’s 500 in­dex by 2.6 per­cent in a week­long pe­riod when the broader in­dex de­clined only 1.8 per­cent. Com­puter and elec­tron­ics re­tail­ers fared the worst, sink­ing 4.7 per­cent.

Not so fast, says Karyn Ca­vanaugh, mar­ket strate­gist with ING In­vest­ment Man­age­ment in New York. The con­sumer dis­cre­tionary sec­tor is among her fa­vorites.

“The con­sumer has shown sur­pris­ing re­silience through­out this tepid re­cov­ery and we be­lieve will con­tinue to do so,” Ca­vanaugh says. The hous­ing turn­around “will fur­ther aid con­sumer and con­sumer con­fi­dence,” she said.

Ac­cord­ing to Kelly and other mar­ket bulls, con­sumers haven’t mean­ing­fully slowed their spend­ing.

They’re merely hold­ing off as they wait for law­mak­ers to craft a deal that would pre­vent some of the sched­uled tax in­creases.

“There’s a dif­fer­ence be­tween con­fi­dence and spend­ing at­ti­tudes,” Kelly said. “Peo­ple are gen­er­ally feel­ing more con­fi­dent be­cause home prices are go­ing up.”

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