So far, analysts are optimistic. "Even though consumer spending on gasoline is slightly less than 3% of disposable income, it plays a more significant role on consumer mood," said Chris Christopher, director of U.S. macroeconomics & global consumer at IHS Economics, in a note. "Elevated levels of consumer confidence are a plus for consumer spending on durables and clothing. So the recent consumer confidence gains are likely to assist fourth-quarter retail sales."
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Forecasts from a variety of analysts say holiday sales will rise about 4% year over year, helped by a recovering economy, higher home prices and the recent stock market rally. And that was before gasoline prices dipped below $3 a gallon.
"Adding in low gas prices, which is expected to give the consumer an extra $40 billion during fourth quarter, analysts should be feeling more optimistic, as these forecasts were made when gasoline was $3.20 per gallon," retail expert Jan Rogers Kniffen, CEO of J. Rogers Kniffen WWE tells TheStreet.
But two factors may hurt these rosy forecasts. One is that some parts of the U.S. economy remain sluggish, meaning slow wage growth and low-paying jobs for many Americans, which makes them hesitant to spend. The other is that banks are still reluctant to raise credit-card spending limits, which is keeping a lid on consumption.
"If I have a concern about the holiday season, it's data that doesn't show great credit lending," Kniffen adds. "Credit growth helps drive holiday sales, so if it's true that banks are hesitant to lend for consumer credit during fourth quarter, that could hurt sales, just like low gas prices will help sales."
Only 5% of banks surveyed recently by the Federal Reserve said credit limit standards have "eased somewhat" for new and existing credit card accounts.
Expectations remain high, however. The average shopper is expected to spend $1,299 on gifts this year, a 13% increase from last year, a Deloitte survey says.
The way in which consumers spend, whether online or in-store, determines which retailers win the holiday shopping season. "Stores like Kohl's (KSS) , Walmart (WMT) and Macy's (M) have huge online businesses and are growing faster than Amazon (AMZN) is," Kniffen says.