COMMENTARY | COLUMNISTS | GEORGE CHAMBERLIN

2015 shows potential for breakout year for economy

Ask most people around San Diego County or across the country how they found the malls and shopping centers to be during the holidays, and they would probably say “very busy.”

However, two reports last week paint different pictures about consumer spending at the end of 2014.

The National Retail Federation said holiday sales in November and December totaled $616.1 billion, up 4 percent from the same period a year earlier. In addition, non-store holiday sales, an indicator of online and e-commerce sales, grew 6.8 percent to $101.9 billion.

“There is every reason to believe that we have moved well beyond the days of consumer pessimism and that the trajectory for retailers continues to point up,” said Matthew Shay, president and CEO of the federation.

But the Department of Commerce reported retail sales in December fell 0.9 percent from the previous month to $442.9 billion. Compared with the same month in 2013, sales were up 3.2 percent.

While a big chunk of the decline in December sales can be directly attributed to plunging gas sales — down 6.5 percent — other consumer spending areas seemed below expectations. Excluding volatile energy and automobile sales, overall spending was still down 0.3 percent.

“While December figures are disappointing, holiday sales in 2014 are the best we've seen since 2011,” said Jack Kleinhenz, chief economist at the National Retail Foundation. “We remain positive about the future and expect to see consumers continue to benefit from the extra income gained from an improved job market and the dramatic fall in gas prices.”

Consumer spending represents nearly two-thirds of all economic activity in the United States and signs suggest households are breaking out of the depression of the Great Recession. An improving job market, rebounding home and stock prices, and low interest rates are all contributing to higher consumer confidence.

Yet nothing is putting more cash into the pockets of consumers than lower prices at the pump.

“The average price of a gallon of gas has fallen more than $1.40 since the peak last May,” said Diane Swonk, chief economist at Mesirow Financial.

“That savings will cumulate with the reduced costs of transportation, heating and production also associated with cheaper oil. Estimates range from $150 [billion] to $300 billion, depending on how fast businesses can take advantage of the lower prices.

“Lower prices are especially welcome because they give more households a chance to thrive, rather than just survive, in 2015,” she said.

While spending may have cooled slightly going into the end of 2014, the economic attitude of Americans has been steadily moving higher.

A survey from Gallup last week finds half of households say the economy is getting better, with its U.S. economic index reaching the highest level since 2008.

“The year is young, but it's off to a good start in terms of Americans' confidence in the economy. With three positive readings in a row, the index has clearly made progress, although there is much room to improve,” the Gallup report said.

Bottom line: 2015 has the potential to be a breakout year for the U.S. economy. Things are already significantly better than they were a year ago, when two-thirds of the country was mired in the worst winter weather for decades, grinding the economy to a halt.

While unanticipated events will test the U.S. consumer this year, it is in better shape to handle the challenges.

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