Image: Shoppers on 34th Street, New York
Mary Altaffer  /  AP
The National Retail Federation predicts that holiday sales will reach $451.5 billion this year, up 3.3 percent over last year.
updated 12/24/2010 6:37:10 PM ET 2010-12-24T23:37:10

Shoppers came back in force for the holidays, right to the end. After two dreary years, Christmas 2010 will go down as the holiday Americans rediscovered how much they like to shop.

People spent more than expected on family and friends and splurged on themselves, too, an ingredient missing for two years. Clothing such as fur vests and beaded sweaters replaced practical items like pots and pans. Even the family dog is getting a little something extra.

"You saw joy back in the holiday season," said Sherif Mityas, partner in the retail practice at A.T. Kearney.

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A strong Christmas Eve augmented a great season for retailers. The National Retail Federation predicts spending this holiday season will reach $451.5 billion, up 3.3 percent over last year.

That would be the biggest increase since 2006, and the largest total since a record $452.8 billion in 2007. The holiday season runs from Nov. 1 through Dec. 31, so a strong week after Christmas could still make this the biggest of all time. Spending numbers through Dec. 24 won't be available until next week and final numbers, through Dec. 31, arrive next month.

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The economy hasn't improved significantly from last year. Unemployment is 9.8 percent, credit remains tight and the housing market is moribund. But recent economic reports suggest employers are laying off fewer workers and businesses are spending more. Consumer confidence is rising.

"I was unemployed last year, so I'm feeling better," said Hope Jackson, who was at Maryland's Mall in Columbia on Friday morning. Jackson bought laptops and PlayStation 2 games for her three daughters earlier in the season but was at the mall on Christmas Eve to grab $50 shirts marked down to $12 at Aeropostale.

Some spending growth online has been driven by free shipping offers and convenience. From Oct. 31 through Thursday, about $36 billion has been spent online, a 15 percent increase over last year, according to MasterCard Advisors' SpendingPulse.

Taubman Centers and Mall of America have reported strong clothing sales, which was a hard sell last year. Jewelry sales sparkled throughout the season.

Stores expect solid profits because they didn't have to slash prices as Christmas neared, analysts say.

Some habits adopted during the recession lingered. Shoppers used cash more and credit cards less.

The final six days of the holiday shopping season are Sunday through next Friday. They're only 10 percent of the 61 holiday shopping days but can account for more than 15 percent of spending.

For the economy, the key question is whether strong spending this holiday season will continue into the new year.

Still, stores were encouraged by what they saw in the final stretch of the holiday season.

Even pets made it back onto gift lists this year. Three Dog Bakery, a pet-supply chain in Clinton Township, Mich., whose specialties include $15.99 jars of banana-nut dog cookies, opened three years ago at the start of the recession.

"We opened at the worst possible time in the world. Everyone was pulling back," owner Chad Konzen said.

Wednesday, the store had its best day ever. "Gourmet, all-natural dog treats are not a necessity," Konzen said. "But now people are feeling more comfortable. You can only be thrifty for so long."

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Video: Last minute shopping rush in full force

  1. Closed captioning of: Last minute shopping rush in full force

    >>> the last-minute rush is in full force at the mall and online. for all those procrastinators who still haven't quite finished their christmas shopping . nbc's john yang is on chicago's magnificent mile again for us tonight.

    >> reporter: good evening, carl. there are now no more shopping days left until christmas . it turns out not all of those last-minute shoppers are procrastinators. walter dawkins was a man on a anything today. he had just one hour to do all his christmas shopping .

    >> you shop last minute, there's no times for a decision. so you get it done in quarter of a time, so that's the good part.

    >> reporter: for elizabeth, it's not procrastination, it's strategy. he's been here five of the last seven days scouting things out.

    >> i needed to know where i was going, what i was doing.

    >> reporter: last-minute shoppers are helping retailers to what's shaping up to be the best holiday season since 2006 . the national retail federation raised its estimate of spending to more than $451 billion, a 3.3% increase over last year. and online shopping continues to grow. an estimated $36.4 billion since the end of october, up more than 15%.

    >> we're seeing strength across the board. but the categories leading the way have been apparel, electronics, jewelry and gift cards .

    >> reporter: retailers aren't offering the last-minute deep discounts this year they have in the past because they don't have a lot of unsold inventory. what about people still looking for that perfect gift? a survey found 46% said they would give an iou and 8% said they would just avoid the people they hadn't gotten presents for. because christmas falls on a saturday this year, retailers are missing out on a big weekend shopping day, but they're already looking forward to sunday, the day after christmas . they're hoping that could be one of the top ten shopping days of the whole year. carl?

    >> john yang for us tonight. john, thank you for that.

Explainer: The top 10 business stories of 2010

  • Image: BP CEO Tony Hayward surveys gulf spill repair work
    AP

    In 2010, the economy rebounded fitfully from the Great Recession — starting strong, wobbling at midyear but showing enough vigor by year's end to quell fears of a second recession. Yet Americans hardly felt relief under the weight of high unemployment, which began the year at 9.7 percent and is now 9.8 percent.

    An oil spill devastated the economy and environment along the Gulf Coast and hammered energy giant BP's stock price and reputation.

    China muscled past Japan to become the world's No. 2 economy, a reminder that the global economic order is shifting and America's supremacy is diminishing.

    It was a year of job shortages and swollen budget deficits that disheartened Americans and caused deep losses for incumbent Democrats on Election Day. The Federal Reserve tried with scant success to jolt the economy with record-low interest rates.

    The struggling economy was voted the top business story of the year by U.S. newspaper editors surveyed by The Associated Press. The oil spill in the Gulf came in second, followed by China's economic rise.

  • 1. Economy struggles

    Image: Unemployment brochures are seen on display at the employment training facility, JobTrain, in Menlo Park, Calif.,
    AP

    Climbing out of the deepest recession since the 1930s, the economy grows at a healthy rate in the January-March quarter. Still, the gain comes mainly from companies refilling stockpiles they had let shrink during the recession. The economy can't sustain the pace. The lingering effects of the recession slow growth.

    The benefits of an $814 billion government stimulus program fade. Consumers cut spending in favor of building savings and slashing debt. Businesses hesitate to hire. Cities and states lay off workers. Growth slows through spring and summer.

    Unemployment stays chronically high. In May, the number of people unemployed for at least six months hits 6.8 million — a record 46 percent of all the unemployed.

    Pointing to the deficits, Congress resists backing more spending to stimulate the economy. The Federal Reserve seeks to fill the void by announcing it will buy $600 billion in Treasury bonds to try to further lower interest rates, lift stocks and coax consumers to spend.

    As the year closes, the economy makes broad gains. Factories produce more. Consumers — the backbone of the economy — return to the malls. Congress passes $858 billion in tax cuts and aid to the long-term unemployed. Yet more than 15 million Americans are still unemployed. Economists say a full economic recovery remains years away.

  • 2. Gulf oil spill

    Image: Plaquemines Parish coastal zone director P.J. Hahn lifts his boot out of thick beached oil at Queen Bess Island.
    AP

    An explosion at a rig used by BP kills 11 workers and sends crude oil gushing into the Gulf of Mexico. The spill devastates the fishing and tourism industries along the Gulf Coast and causes environmental damage that may last for decades. BP sets up a $20 billion fund to compensate fishermen, restaurateurs and others whose livelihoods were damaged.

    The oil giant still faces civil charges and a criminal investigation by the Justice Department and lawsuits from hundreds of individuals and businesses. BP's stock market value shrinks by more than $100 billion after the April 20 disaster before bouncing about halfway back.

  • 3. China's rise

    Image: Workers install scaffolding at a construction site as a Chinese national flag flies near by in central Beijing.
    Reuters

    China passes Japan as the world's second-biggest economy. The World Bank says it could surpass the United States by 2020. China's gross domestic product is spread out over 1.3 billion people — amounting to about $3,600 per person. That compares with GDP in the U.S. of about $42,000 per person. In Japan, it's about $38,000 per person. China's thirst for raw materials and other products helps the rest of the world recover from the recession. Still, the U.S. and Europe complain that China gives its exporters an unfair competitive edge by keeping its currency artificially low.

  • 4. Real estate crisis

    Image: Home for sale
    AP

    Housing remains depressed despite super-low mortgage rates. The average rate on a 30-year fixed mortgage dips to 4.17 percent in November, the lowest in decades. But home sales and prices sink further. Nearly one in four homeowners owe more on their mortgages than their homes are worth, making it all but impossible for them to sell their home and buy another.

    An estimated 1 million households lose their homes to foreclosure, even though the pace slows after evidence that lenders mishandled foreclosure documents. Some did so by hiring "robo-signers" to sign paperwork without checking their accuracy.

  • 5. Toyota recall

    Image: Toyota Master Service Technician Mike Blomberg inspects a gas pedal assembly.
    AP

    Toyota's reputation for making high-quality cars is tarnished after the Japanese automaker recalls 10 million vehicles for sudden acceleration and other problems. Toyota faces hundreds of lawsuits alleging that some models can speed up suddenly, causing crashes, injuries and deaths. Toyota blames driver error, faulty floor mats and sticky accelerator pedals for the unintended acceleration. The uproar damages its business. Toyota's U.S. sales rise just 0.2 percent through November in a year when the industry's overall sales climb more than 11 percent.

  • 6. GM's comeback

    Image: GM headquarters
    AP

    General Motors stock begins trading again. It signals the rebirth of a corporate icon that fell into bankruptcy and required a $50 billion bailout from taxpayers. GM uses some proceeds from its November initial public offering to repay a portion of its bailout. (Washington still holds about a third of GM's stock.) GM's recovery helps rejuvenate the industry. Sales of cars and light trucks rise 11 percent through November compared with the same period in 2009. Shoppers who had put off replacing their old cars return to showrooms.

  • 7. Financial overhaul

    Image: Barack Obama, Christina Romer, Timothy Geithner, Barney Frank, Paul Volcker
    AP

    Congress passes the biggest rewrite of financial rules since the 1930s. The law targets the risky banking practices and lax oversight that led to the 2008 financial crisis. The law creates an agency to protect consumers from predatory loans and other abuses, empowers regulators to shut down big firms that threaten the entire system and shines more light into markets that have eluded oversight. Republican critics say the law goes too far, imposing burdensome rules that will restrict lending to consumers and small businesses.

  • 8. European bailouts

    Image: Athenians walks behind a board showing exchange rates at a foreign currency exchange shop in Athens on Wednesday.
    AP

    Greece and Ireland require emergency bailouts, raising fears that debt problems will spread and destabilize global markets. European governments and the International Monetary Fund agree to a $145 billion rescue of Greece in May and a $90 billion bailout of Ireland in November. The bailouts require both countries to slash spending, triggering protests by workers. Investors fear that debt troubles will spread to Spain, Portugal and other countries, weaken the European Union and threaten the future of the euro as its common currency.

  • 9. 500 million Facebook users

    Image: Mark Zuckerberg
    AP

    Facebook tops the 500-million-user mark. It expands its dominance of social media and further transforms how the world communicates. If it were a country, Facebook would be the world's third-largest. Facebook tightens its privacy settings after criticism that personal information is being disseminated without users' knowledge or permission. Founder Mark Zuckerberg is named Time magazine's "Person of the Year" and is the subject of a high-profile movie about Facebook's creation.

  • 10. iPad mania

    Image: Customer uses an Apple iPad
    AP file

    Apple Inc. unveils the iPad, bringing "tablet" computing into the mainstream and eroding laptop sales. Apple is expected to sell more than 13 million iPads this year. The iPads sell about twice as fast as iPhones did after their 2007 introduction. The price of Apple stock rockets more than 50 percent in 2010. Competitors scramble to try to catch up. They include the Dell Streak, BlackBerry PlayBook, the Samsung Galaxy Tag and HP Slate.

Data: Latest rates in the US

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Home equity type Today +/- Chart
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