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With the economy likely to feel the effects of a fiscal plan standstill, the National Retail Federation is urging Congress to act on the ‘fiscal cliff’ and help consumers remain in good financial standing.

Middle-class tax increases will only lead to continued financial hardships for many consumers, the NRF noted. Not only will consumers feel the pain of a tax increase, but so too will the overall economy, the group stated.

“Although this may not be the perfect solution to the fiscal crisis, what’s important is that Congress provide certainty going into the new year on tax issues that will impact every American,” said Matthew Shay, president and CEO of the NRF. “Worries over the economy have already affected consumers during the holiday season. Worries coupled with actual tax hikes and spending cuts add up to a disaster our economy cannot afford.”

In addition to avoiding the fiscal cliff, Shay remarked that the White House and Congress need to develop a solid fiscal plan for the nation in the long-term so the country can avoid such a situation from arising again.

Should the fiscal cliff be avoided, the NRF indicated that retail sales are likely to grow modestly in 2013 — between 2 and 2.5 percent. However, should no resolution be arrived at by the federal government, those figures could be lower. In fact, NRF chief economist Jack Kleinhenz noted sales may be negative during the first half of 2013, should this be the case.

Holiday sales likely provided a modest bump for retailers and the economy in general during the fourth quarter. One report shows moderate spending activity in that period. MasterCard’s Advisors SpendingPulse report indicated consumer spending between October 28 and December 24 improved 0.7 percent from a year earlier. However, the boost wasn’t as high as the previous year’s, when there was a 2 percent increase annually.

“The broad brush was Christmas wasn’t all that merry for retailers, and you have to ask what those margins look like if the top line didn’t meet their expectations,” said Pittsburgh-based Fort Point Capital Group senior equity research analyst Kim Forrest.

Image: Andy Price, via Flickr

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