New York City -- Consumer spending will rise 3% this year, according to retail analysts at S&P Equity Research. While the majority of publicly traded retailers were able to capture share in 2010 from smaller competitors or those that were forced to declare bankruptcy, and also increase profit margins, the S&P retail analysts see 2011 as another good year.
"The most important driver of retail sales is the trend in the labor market, and we think the employment situation will continue to stabilize with some slight improvement," said Marie Driscoll, group head of the Consumer Discretionary Retail analysts at S&P Equity Research. "We think this will be a slight positive for retail sales this year, although we admit that various aspects of the labor market are still extremely poor."
Perhaps the biggest catalyst for improving retail sales in 2011 will be the extension of the Bush-era tax cuts and the 2% payroll tax cut for all workers one year, according to Driscoll.
"We think this 'tax holiday' will have a significant impact on spending, as the median income family earning about $50,000 per year will receive an additional $1,000 in its paychecks and those earning $106,800, the current limit of FICA taxes, and above will take home about $2,100 more this year," Driscoll said.