An economic lift after the vote?

Relief that the election is over could put some consumers in more of a spending mood.

By , Staff writer of The Christian Science Monitor

No one can predict how long it will last, but economists expect the economy to get an Obama bump, which could give retailers something to smile about this fall.

The cause of this feel-good period: relief that the election – with all its negative ads – is over and the expectation that both political parties will put a greater emphasis on national unity.

"When you are knee-deep in a contentious campaign, there is a lot of negative rhetoric," says Scott Krugman of the National Retail Federation in Washington. "Once it's lifted, you get a kind of halo effect."

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On Tuesday, a survey found that consumers ranked the election as the second most important factor in their holiday spending plans, only trailing the high cost of living. The survey also found that 8 percent of households, considered a modest amount, would increase their spending with an Obama victory.

"With Obama winning and more optimism, those factors could on the margin help holiday spending," says Michael Niemira, chief economist for the International Council of Shopping Centers, which commissioned the survey with Goldman Sachs. "But we don't hold out hope for a huge lift."

If more consumers do open up their purse strings somewhat, it would represent a change in plans. In mid-October, ShopLocal, which builds local-promotion websites for large US retailers, found that 59 percent of 3,000 shoppers said they planned to reduce their holiday spending. Only 4 percent said they planned to increase it.

"This is obviously about the stock market and jobs," says Vikram Sharma, CEO of the Chicago-based company. "We measure the pulse of the shopper, and the pulse remains very faint."

Hope of improvement

Yet Mr. Sharma says he can see how consumer sentiment might improve. The stock market rose 10 percent last week and rose again on Election Day. The end of the campaign, he says, might also relieve a stress point on some consumers. "If one of the stress points is whether or not my guy is going to win the election, this is one less thing for [me] to stress about," he says.

Economists warn, however, that America faces some difficult news about the state of its pocketbook. On Friday, the Labor Department reports the unemployment numbers for October. The unemployment rate could jump to 6.3 percent from 6.1 percent, predicts Joel Naroff of Naroff Economic Advisors in Holland, Pa.

"We are moving from historically low unemployment to troublesome levels," Mr. Naroff says. "The reality is that businesses must protect themselves at this point because they don't know how steep and long the downturn will be."

Job losses are reverberating through Main Street, says Bruce Murdy, president of Rawle Murdy Associates, an advertising and public-relations firm in Charleston, S.C.

"Everyone knows someone who has been laid off. It is the dark cloud hanging over us," he says. "We have seen it with our retail clients, where we are seeing people trading down," he says. "If they go a restaurant, they are ordering hamburger instead of steak."

Indeed, the readings for consumer confidence are at historical lows. And elections have had only a marginal effect on confidence, says Lynn Franco, director of the Conference Board's Consumer Research Center in New York. "Whatever the trend was, it stays in place," she says.

Ms. Franco is hoping for some noticeable improvement in consumer expectations for the future. "When confidence is this low, consumers are less willing to spend," she says.

A short-term distraction

Historically, elections have been a short-term distraction. "This week has probably been like a ghost town in some retail stores," says Bill Martin, co-founder of Chicago-based ShopperTrak, which provides information for retailers. "The fact the election is over means there will be fewer ads from the candidates on television and more promotions for merchandise. And so we might see some shoppers return to stores to some extent."

In the next week or two, Mr. Martin would not be surprised to see some improvement in the retail climate as part of an emotional reaction to the election. "There is a lot of money on the sidelines, and maybe it will loosen up," he says. "If it can carry over into the holidays, and we can get the banks to lend some money, the holiday season may not be disastrous but maybe will be flat to up a little bit."

Some retailers hope to capitalize on any change in consumer sentiment.

On Wednesday morning, Lunaboston.com, a website that sells women's handbags and accessories, sent out a sale notice to some of its customers. "Obama's followers were very passionate, and we wanted to ride that wave a little bit," says Sarah Johnson, CEO of the Boston company.

Some high-end stores are also more optimistic, particularly since the stock market has come back somewhat. One of those is the Astro Gallery of Gems in New York.

"Things will settle down and be much more active," says Dennis Tanjeloff, the company's president. "We are expecting sales to go up 2 to 3 percent over last year."

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