While consumer confidence remains shaky, retail sales should see a modest increase through the holiday season, prodded by broadening growth in personal consumption, according to recent analysis by Kurt Salmon.

Specifically, Kurt Salmon expects personal consumption expenditures to grow between 2.1% and 2.6% for the final quarter of 2010. These findings are based on Kurt Salmon’s proprietary analysis of historical consumer consumption figures and intent to spend data.

Since June 2009, the official end of the Great Recession, nondiscretionary consumer spending—in categories such as health care, housing and utilities—has buoyed a slow but steady recovery. However, in the last quarter, this balance shifted to discretionary categories, with clothing topping the list of high-growth categories. Kurt Salmon analysis shows spending on durable and nondurable goods will continue to outpace spending on services this holiday season.

“Now, a year and a half into the recovery, we are seeing discretionary spending picking up,” said Todd Hooper, Kurt Salmon partner and retail expert. “While high unemployment is preventing some consumers from taking part in the emerging recovery, we still expect the improved discretionary spending to translate into modest year-on-year gains for retailers.”

High unemployment continues to drag down consumer confidence, which remains below pre-recession levels and which declined slightly in August and September. Kurt Salmon’s analysis also reveals that while consumers are ready to spend more, their new purchasing habits are not yet set.

“Consumers are still settling into their post-recession spending rhythm,” Hooper said. “They know they have to adjust their spending, but they are still sorting out priorities. During this transition, they are not able to consistently anticipate how their spending will change for any given category.”

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17 November 2010