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“Total retail sales and credit card usage are expected to rise 1.6% from a year ago, as consumers dip their toes back into the retail pool. General merchandise and apparel store sales (GMA), which more closely track seasonal spending patterns, are expected to rise 1.3%.

After adjusting for inflation, both series essentially will be flat from a year ago. The quality of spending this holiday season, however, will still be dismal when compared to Christmases past,” predicts Diane Swonk, chief economist of Mesirow Financial, in her November issue of Themes on the Economy.

In her November newsletter, a special holiday edition, Swonk provides her holiday outlook and sheds light on factors that will affect consumer spending this holiday season.

Real disposable income growth–the single-largest determinant of consumer spending–is expected to remain weak in response to ongoing job losses and continued weakness in overtime hours.

Credit conditions remain extremely tight, despite some abating in the pace of credit market tightening. Home equity lines of credit have virtually disappeared with the fall in home prices, while credit cards are getting more expensive and harder to get by the day.

Recent increases in the stock market have helped calm the panic and restore a portion of the wealth lost during the height of the crisis. Household net worth, however, remains well below the high-water mark it hit in the first half of 2007.

Consumer sentiment has receded after a slight improvement over the summer, and remains at its lowest levels since the depths of the recessions of the 1980s. Concerns over the strength of the recovery and the persistence of high unemployment appear to be the primary concerns.

Energy prices are on their way back up after falling dramatically during the recession, which will disproportionately squeeze middle- and low-income households.

The only unambiguous positives are pent-up demand and a rise in saving, which should allow consumers to keep spending even as they feel constraints elsewhere on their balance sheets.

SOURCE Mesirow Financial