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November Consumer Spending Slides 0.6%

BY CSA STAFF

WASHINGTON, D.C. The Commerce Department reported Wednesday that consumer spending fell by 0.6% last month, slightly less than the 0.7% drop economists had expected, but still marking the fifth straight month of decreased spending.

The five-month stretch marks the longest series of spending declines in government records that go back to 1959.

A separate report Wednesday showed that the number of newly laid off workers filing claims for unemployment benefits rose to 586,000 last week, up by 30,000 from the previous week, a much bigger increase than analysts had expected.

The personal spending reports showed that Americans’ incomes fell by a worse-than-expected 0.2% in November. It was the first decline since July and reflected, in part, the fact that more than a half-million jobs were cut in November as the recession deepened.

The 0.6% drop in consumer spending followed an even larger 1.0% fall in October. But the steep plunge in gasoline prices, which is good news for consumers, made the declines look worse. Excluding price changes, consumer spending would have dropped by 0.5% in October and actually risen by 0.6% in November.

Economists closely watch consumer spending because it accounts for two-thirds of economic growth. For the July-September quarter, the government reported Tuesday that spending had fallen by 3.8%, the biggest quarterly setback in 28 years.

Analysts say the fourth quarter could turn in an even worse performance, given that the recession has intensified. The economic problems facing households have translated into weak holiday shopping for retailers.

Michael Niemira, chief economist for the International Council of Shopping Centers (ICSC), is forecasting that sales at established stores in November and December will be down 1.5% to 2% — making this the weakest holiday season since at least 1969.

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NRF calls for national sales tax holidays

BY CSA STAFF

WASHINGTON The National Retail Federation has asked President-elect Barack Obama to incorporate a series of national sales tax holidays into upcoming economic stimulus legislation as an important step toward rebuilding consumer confidence, saying short-term gains from consumer spending and long-term growth from job creation are both needed to achieve economic recovery.

NRF proposed that tax holidays be held during March, July and October 2009, each lasting 10 days including two weekends. Tax-free treatment would apply to all tangible goods subject to a state sales tax ranging from apparel and home furnishings to restaurant dining and automobiles but would exclude tobacco and alcohol. The federal government would reimburse the 45 states that have sales taxes for the lost revenue, and would provide the five states without a sales tax (Alaska, Delaware, Montana, New Hampshire and Oregon) with revenue approximating the sales tax reimbursement that would be received by states with similar population.

NRF also called for infrastructure investment in roads, rails, ports, public schools and renewable energy projects, saying it would have a double benefit of creating jobs and repairing systems that are critical to commerce.

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Pershing Square extends Borders financing agreement

BY CSA STAFF

ANN ARBOR, Mich. Borders Group announced an agreement with Pershing Square Capital Management, L.P. on behalf of its affiliates, to extend the expiration date of the previously announced Borders option to “put” its U.K.-based Paperchase gifts and stationery business to Pershing Square for $65 million, subject to certain conditions.

The “put” was due to expire Jan. 15, 2009, but has now been extended until Feb. 16, 2009. At the same time, the deadline for repayment of the $42.5 million senior secured term loan, which was originally payable to Pershing Square by Borders on Jan. 15, 2009, has also been extended to Feb. 16, 2009. Other terms of the “put” option and the term loan remain unchanged except that the approximately $1 million loan repayment premium that Borders is required to pay Pershing upon repayment of the $42.5 million loan remains due no later than Jan. 15, 2009.

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