Deutsche Bank: Holiday spending is poised to surge and that says something important about the U.S. economy

It won’t be long until you start seeing commercials for Black Friday specials and Cyber Monday bargains. This year, Deutsche Bank’s Chief International Economist Torsten Sløk expects the holiday season to bring a lot of cheer to retailers, many of which have struggled since the recession.

He’s taking his lead from a Gallup survey done earlier this month that showed consumers in the U.S. this year plan to spend the highest amount of money on the holidays since 2007.

Sure, there’s still a way to go to get back to 2007 levels, but it’s nevertheless encouraging to see a pickup after the big stall in spending over the past few years. Much like holiday spending, retailers’ stocks have also taken a pause. Here’s the S&P Retail Select Industry Index over the past two years.

According to Sløk, not only should the pick-up in holiday spending be good news for the likes of Kohl’s, Walmart, and J.C. Penney, but it bodes well for the U.S. economy as a whole.

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Combined with consumer confidence for lower income groups near the highest levels ever, the message for investors is clear: U.S. consumers don’t worry about the things we worry about in financial markets. Put differently, U.S. consumers don’t seem to worry about the risk of a hard landing in China, the widening of high yield credit spreads, a potential government shutdown, Brazilian corporate debt levels or low bond market liquidity. In other words, next time someone tells you “X is really worrying” you should ask yourself if this is worrying for investors holding assets impacted by X or if X is truly worrying for U.S. consumers, who make up 70 percent of US GDP.

Happy spending.

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