Lower gas prices may give retail relief

Lower gas prices could provide a lift to what are otherwise predicted to be bad U.S. holiday sales, but experts say it will take some time for consumers to feel confident enough about the troubled economy to go back to spending.

Easing fuel prices could put as much as $30 billion more directly into consumers' pockets in the next few months, but in the near-term that will still be overcome by fears of a deep recession and job losses.

Cheaper gas "should help on the margin in terms of holiday sales, but I think holiday sales are still going to be weak," Jason Henderson, a vice president at the Omaha, Nebraska, branch of the Federal Reserve Bank of Kansas City, told Reuters.

"The lower gasoline prices will have different impacts on different income levels. Lower income levels will be much more impacted than people with higher incomes," Henderson said.

On the positive side, consumer savings from cheaper energy costs could reach $30 billion, said Craig Johnson, president of retail consulting firm Customer Growth Partners, with up to half of that amount getting spent in stores in November and December.

"Adding $15 billion back into retail sales will take what is otherwise a dismal holiday season and turn it at least into a semi-decent season," said Johnson. He forecasts holiday sales 3.2 percent ahead of last year's, up from a previous view of 1.2 percent growth.” It’s still going to be a very challenging Christmas for retailers, but not anywhere where it's been predicted to be," he said.

Leading U.S. retailers, including Wal-Mart, Costco Wholesale Corp and J.C. Penney Co Inc release October results on Wednesday and Thursday and Thomson Reuters is predicting a drop of 0.1 percent. For the holiday period, many forecasters have forecast much weaker growth, with some expecting holiday sales to be their worst in two decades.

HOPE AT THE PUMP

Still, lower gas prices have placed hope for some retailers including Wal-Mart Chief Executive Lee Scott.

"Quite honestly, I am very positive about a number of things. The thing I'm most positive about is driving from my office to here, I went by a service station where the price of regular was $2.099 -- in Bentonville, Arkansas, just 30 minutes ago," Scott told analysts last week