There are more signs that American consumers are coming back as the key holiday shopping season gets underway. Revised figures show the U.S. economy grew faster than initially reported during the third quarter, thanks in part to an uptick in consumer and government spending. Retailers are hoping consumers will continue spending as the traditional holiday shopping season begins in the U.S.
Americans celebrating their country's annual Thanksgiving holiday have more to be thankful for this year.
A flurry of new economic reports shows that Americans earned more and spent more last month - while the number of people applying for unemployment benefits fell to its lowest level in two years.
A new survey by the Consumer Federation of America backs up the latest government data.
Executive Director Stephen Brobeck says Americans are less stressed than they were this time last year.
"The most encouraging finding to me is that significantly fewer said their financial condition worsened during the year with only 8 percent reporting that it was much worse," said Brobeck. "That was down from 14 percent in 2009."
That's good news for retailers as the holiday shopping season kicks off leading up to Christmas. The season is a make or break month for retailers, often accounting for as much as 40 percent of their yearly profits. Mike Schenk, a vice president with Credit Union National Association, expects a modest improvement in consumer sentiment as 2010 comes to a close.
"Fifty-seven percent say they will spend as much or more than they spent last year," said Schenk. "That's a three percent increase more from survey results last year."
Consumer spending is the biggest driver of the U.S. economy, accounting for about 70 percent of total output. Despite modest increases in the last three months, revised figures show the economy grew at a tepid 2.5 percent in the third quarter. Economists say the economy needs to expand at least 5 percent each year to reduce the nation's high unemployment rate by just 1 percent.
"The bottom line: economic uncertainty, weak labor markets and heavy debt loads will have consumers spending very, very cautiously this year,"said Schenk.
Unemployment remains stuck at 9.6 percent. And it's not expected to decline very much next year. Still, the drop in first time claims and the uptick in consumer spending was enough to cheer investors.
Stock prices traded sharply higher Wednesday. The New York Stock Exchange closes for the Thanksgiving holiday on Thursday.