Hope for holidays

From Intel Corp. to TJX Cos., it’s beginning to look a lot like the retail holiday season will be happier than forecast.

Intel, the world’s biggest chip maker, cited stronger consumer demand in projecting last week that its sales in the fourth quarter would be $9.7 billion to $10.5 billion, compared with a $9.5 billion average prediction in a Bloomberg News survey.

TJX, operator of clothing store chains T.J. Maxx and Marshalls, also raised its fourth-quarter sales estimate to a gain of 3 percent to 5 percent from an increase of 2 percent to 4 percent.

Pier 1 Imports Inc., the Fort Worth, Texas, retailer of imported furniture, said sales at stores open at least a year increased 9.9 percent last month.

“Consumers’ bunker mentality is gradually giving way to more familiar spending patterns,” said Michael Feroli, a former Federal Reserve official who is now an economist at JPMorgan Chase in New York.

Rising sales would be good news for the economy as well as retailers. Consumption accounts for about 70 percent of gross domestic product, so more spending helps the recovery.

UBS Securities in New York improved its outlook for third-quarter growth to 3.5 percent from 2.5 percent after last week’s report on September retail sales came in higher than expected.

GDP fell 0.7 percent in the second quarter; it was the fourth consecutive decline, which would be the longest since such records began in 1947.

“Retail sales offer the most encouraging sign of a more lasting turn in activity,” Robert DiClemente, chief U.S. economist at Citigroup Global Markets in New York, said Friday in a note to clients.

He sees the U.S. economy growing about 2.75 percent in the second half of this year and about 3.25 percent in 2010.

Helping to drive the improvement in consumer spending is a rebound in household wealth, said Steven Wieting, managing director of economics and market analysis at Citigroup Global Markets.

Retail sales excluding automobiles and restaurants might advance as much as 1.5 percent in the holiday season as “frugal fatigue” sets in and shoppers open up their wallets, said Marshal Cohen, chief industry analyst for NPD Group, a Port Washington, N.Y., market research firm.

Sales dropped 4.2 percent a year ago during what the International Council of Shopping Centers said was the worst holiday season in four decades.

“Slowly but surely, the underlying sales performance is inching higher,” said Mike Niemira, chief economist for the trade group in New York. “The retail-sector recovery is starting to unfold.”

Sales at U.S. retailers, excluding automobiles, climbed 0.5 percent in September. The increase, more than twice the 0.2 percent anticipated by 78 economists in a Bloomberg survey, followed a 1 percent gain in August, the biggest in six months.

Sales at stores open at least a year have outpaced analysts’ estimates in the past two months and are likely to do so again in October, said Ken Perkins, president of Retail Metrics Inc. in Swampscott, Mass. Analysts are predicting a 1.4 percent gain this month after a 1.1 percent increase in September and a decline of 2.3 percent in August.

“There is definitely pent-up demand out there,” Mr. Perkins said. “The chances of an upside surprise in holiday sales are very good.”

The steepest rally in the stock market since the Great Depression may have convinced households they don’t need to save as much as they thought, said John Ryding, chief economist at RDQ Economics LLC in New York. The S&P 500 Index is up 61 percent since March 9, its low date for the year.

“The rebound in equities may have lowered the target savings rate from around 7 percent to around 5 percent,” he says.

The rise in stock prices is particularly welcome for affluent consumers. The top 20 percent of U.S. income earners account for more than half of total wealth and about 37 percent of consumer spending, according to Andrew Tilton, an economist at Goldman Sachs Group in New York.

Household net worth rose to $5.3 trillion in the second quarter from $5.1 trillion in the first as share prices rallied and home values steadied, according to data from the Federal Reserve.

Retailers are trying to entice customers to spend some of that money. Wal-Mart Stores Inc. said it will offer a larger selection of toys priced at $10. Hhgregg Inc., an Indianapolis chain of 118 stores, will sell 32-inch flat-panel TVs for $299 and is adding more GPS navigational devices and digital cameras.

Toys R Us Inc. is opening more than 80 temporary Holiday Express locations in malls and shopping centers across the country starting this month. Saks Inc., the New York luxury retailer, is offering free shipping on purchases from its Web site.

Many consumers are open to being convinced. About a fifth of the people surveyed last month by BIGresearch LLC said they haven’t decided how much they are going to spend this holiday season.

Roseanne Morrison, fashion director at the Doneger Group trend-forecasting firm in New York, said she is optimistic.

“By the time Christmas comes around, people are going to be ready to celebrate and throw off their worries and buy something special,” she said in an Oct. 13 e-mail. “You can only be low for so long.”