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Consumer Spending Expected to Surge This Holiday Season

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The steadily improving economy has led many consumers across the country to feel better about their finances in general, and that in turn will likely lead to increased spending once again this holiday season.

New projections show that consumer spending for holiday shopping alone could rise 4.5 percent this year, according to the 2012 Retail Report from the global business advisory firm FTI Consulting. During that time, many purchases will be made online, perhaps as a result of consumers trying to take advantage of what are considered better deals, or to conduct more effective efforts to compare prices for the items they want to buy. Interestingly, the company also projects that online sales will increase 13.5 percent over the course of next year, and could account for as much as 15 percent of all retail purchases by the end of the decade.

And while this year’s growth in spending is actually smaller than the 6.2 percent observed last year, it’s generally believed that this is the result of something retailers are doing, rather than consumers approaching more cautiously, the report said. Retailers offered significant discounts last year as a result of slumping consumer confidence – as a means of boosting sales – but that rating has grown 25 percent in the last year, and as such, fewer discounts will be available this year.

“Overall, consumer spending trends have been fairly impressive considering the financial anxieties still felt by many Americans,” said Bob Duffy, global co-leader of the FTI Consulting Corporate Finance/Restructuring practice. “Despite slowing momentum in recent months and lingering concerns over income growth and employment prospects, sales growth trends have managed to stay within the range of historical averages. We find consumer spending across a number of product and store categories to be fairly encouraging and anticipate this vigor will continue through the holiday shopping season.”

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This type of spending could lead to even more significant increases in credit card debt than what is typically seen as part of traditional seasonal climbs, which themselves tend to result in more instances of delinquency and default once the new year begins. Higher debts and missed payments can be significantly damaging to borrowers’ credit standings and put them in financial danger for a number of reasons.

Image: Better Than Bacon, via Flickr

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