Holiday spending raises recession flag: James Saft

by James Saft

LONDON (Reuters) - U.S. consumer spending in the crucial holiday period looks weak, upping the chances that the credit crunch tips the economy into recession.

Americans spent less in stores last week compared to a year ago for the third week running. More of them say they will spend less this year, while fewer say they will spend more.

Little wonder. The seemingly unsinkable American consumer is weighed down by debt, has seen the ATM machine they call home shrink in value and is now finding loans are harder to come by.

With consumer spending accounting for about 70 percent of U.S. gross domestic product, the stakes this Christmas couldn't be higher.

Sales in the week ending December 15 fell 0.4 percent from a year earlier, compared to falls of 2.7 percent and 4.4 percent the two weeks before, ShopperTrak RCT said on Wednesday.

A National Retail Federation survey released on Tuesday found that a third of shoppers intend to spend less this year, up from 29 percent who were cutting back a year ago.

Only 16.4 percent of shoppers plan to spend more this December, down from the 20.4 percent planning an increase last year.

MasterCard data released over the weekend showed sales have slowed steadily since the Thanksgiving weekend.