US holiday retail sales rise

It's turning out to be a cheerful holiday season for US retailers after all, as Bloomberg reports.

U.S. retail sales rose an estimated 3.6 percent this holiday season as online gift-buying, last- minute spending and an extra shopping day spurred a recovery from last year, the worst in four decades.

A jump in purchases the week before Christmas helped year- over-year electronics sales increase 5.9 percent from Nov. 1 to Dec. 24, MasterCard Advisors’ SpendingPulse said in a statement. Jewelry and luxury sales also gained, the research firm said.

Sustained growth in consumer spending could extend the US economic expansion into next year, according to one economist.

The U.S. economy next year will turn in its best performance since 2004 as spending perks up and companies increase investment and hiring, says Dean Maki, the most-accurate forecaster in a Bloomberg News survey.

The world’s largest economy will expand 3.5 percent in 2010, according to Maki, the chief U.S. economist at Barclays Capital Inc. in New York. The rebound in stocks and rising incomes will prompt Americans to do what they do best -- consume, said Maki, a former economist at the Federal Reserve. Faced with dwindling inventories and growing demand, companies will soon become confident the expansion will be sustained, he said...

Maki says central bankers will lift the U.S. overnight bank lending rate target to 0.5 percent in the third quarter, from zero to 0.25 percent currently, and to 1 percent by year- end...

Despite the promising signs for the economy, the Federal Reserve will probably be reluctant to raise rates. But it is apparently preparing for eventual monetary tightening nevertheless.

The Federal Reserve today proposed a program to sell term deposits to banks to help mop up some of the $1 trillion in excess reserves in the U.S. banking system.

The plan, subject to a 30-day comment period, “has no implications for monetary policy decisions in the near term,” the central bank said in a statement released in Washington.

Not so hesitant in raising rates is the Bank of Israel.

The Bank of Israel raised the benchmark interest rate for a third time since the global economy began to recover as growth accelerated and inflation exceeded the government’s target range.

Governor Stanley Fischer increased the lending rate by a quarter of a percentage point to 1.25 percent, the Jerusalem- based central bank said today. Seven of 16 economists surveyed by Bloomberg had predicted the increase, while nine expected no change.