With the economy percolating along, growing at an annual rate of 8 percent-plus, a robust holiday spending season would appear to be a no-brainer.

But many Americans’ homes are stacked to the gunwales with the excesses of past holiday spending. Floors already are groaning with appliances, furniture, apparel, toys and electronics, not to mention boatloads of accessories.

The question is whether such a glut of goods will create a ho-hum attitude toward the current spendfest. After last year’s paltry 2.2 percent growth of holiday sales in the nation’s stores, some analysts are cautious.

That brings us to Thursday’s report of retail sales for November, including the key category of autos. Economist Lynn Reaser says it will show a significant rebound of 0.7 percent, reversing two months of modest declines.

Looking ahead to holiday spending, she says the big winners so far are high-end retailers like Nordstrom and Tiffany’s. Discounters are seeing sales that are slightly soft, but not horrendous.

“The upside has come in auto sales, particularly in robust demand for luxury vehicles, including cars like Cadillacs and sport-utility vehicles,” said Reaser, of Banc of America Capital Markets in St. Louis.

She believes shoppers will make their move before Christmas, resulting in a holiday spending season that will end up “good, but not spectacular. By any measure, it will be the best since 1999.”

While few experts fret that the economy will overheat anytime soon, members of the Federal Reserve, looking out a year or more, must weigh whether tighter credit will soon be needed to rein in activity.

Members of the central bank’s Open Market Committee will conduct their final meeting of the year on Tuesday.

Chicago economist Robert Dederick says “the focus of the discussion has shifted dramatically. There no longer is a feeling that rates can hold steady indefinitely. The issue has become, when does the Fed tighten?”

Dederick, of RGD Economics, says members of the central bank worry that at some point financial markets will signal that rates must move higher.

“Members of the Fed don’t want to appear to be behind the curve,” he said.

But for now, he said, the central bankers aren’t seriously worried about inflation. “They are simply watching for signs that the economy is ready to achieve some meaningful gains in employment.”

By now the stumbling dollar, which has fallen to a new low against the euro and a four-year low against the Japanese yen, was supposed to start narrowing the yawning trade deficit.

But Friday’s report for October is unlikely to show much improvement, after a $41.3 billion shortfall a month earlier. Analysts expect this year’s total trade chasm to easily exceed last year’s $418 billion.

Also Friday, get ready for the November producer price index. While economists aren’t expecting a repeat of a 0.8 percent gain a month earlier, they note that pressures on commodities are continuing to hit prices at the wholesale level, squeezing manufacturers.

The stock market has managed to make it through nine months of trading without a meaningful correction. And with the holiday spirit descending on Wall Street, not many analysts are looking for a sharp setback in the remaining days of 2003.

Chicago investment manager William Hummer says Wall Street is set up for a Santa Claus rally.

“There are few negatives on the horizon, because there has been nothing but cheerful tidings in a broad array of economic variables,” said Hummer, of Wayne Hummer Investments.

While the Fed may rain on the stock market’s parade a bit on Tuesday, by abandoning its phrase that interest rates will remain low “for a considerable period,” Hummer says that won’t derail the rally.

“There is nothing imminent about higher rates,” he said. “In the meantime, investors are expecting next year’s corporate earnings to grow by 15 percent, at a minimum.”

—

(c) 2003, Chicago Tribune.

Visit the Chicago Tribune on the Internet at http://www.chicago.tribune.com/

Distributed by Knight Ridder/Tribune Information Services.

AP-NY-12-05-03 1816EST