Consumer Confidence Falls Despite Reports of Strong Holiday Sales

With the holiday season drawing to a close, one question for those watching the economy still resounds: How did we do?  According to Bloomberg, this holiday season’s sales showed that it was the best performance in five years.

MasterCard Advisors’ SpendingPulse, which measures retail sales by all payment forms including web sales, reported an increase.  Excluding automobiles, retail sales rose $584 billion from November 5 to December 24.  Overall, a 5.5% increase was reported this year–a figure that exceeds last year’s increase of 4.1%.

The improved performance of retail sales may be due in part to the job and consumer markets improving.  With more and more jobs being created and filled, consumer confidence was given a much needed boost.  With a confident consumer comes confident spending.  Bloomberg estimates that consumer spending accounts for roughly 70% of the American economy.

While consumer confidence may have played a role in better sales performance, some of the profit-making can also be attributed to less discounting.  With less discounting, retailers can boost their profit margins during the holiday shopping season.  According to Ken Perkins, president of Retail Metrics, Inc., it may even bring better profits.

With strong holiday sales figures, many hope that the momentum can be kept into 2011.  As reported by the Thomson Reuters/University of Michigan final index of consumer sentiment, consumer confidence peaked in December to the highest it has been in six months.  Today, however, the Conference Board reported a decline in confidence, raising questions about consumer spending figures in the upcoming year.