While US shoppers are counting every penny in the run-up to Christmas, for the European consumer it's almost as if September 11 never happened. While US retail indicators such as the Redbook retail sales average show lower readings than last year, European trading statements and official figures point to a bubbly retail economy. 

Not all European retailers are riding high, of course, and not all US stores are in the doldrums. But experts say Europeans are generally feeling confident about their own financial situation, despite the continuing US recession.

Europe's Shoppers Spend Their Way Out Of Attack Blues

At Hennes & Mauritz, the world's biggest fashion retailer, posted a 20 % year-on-year sales increase - despite lower turnover at its US outlets.

To underline the schism in retail activity on either side of the Atlantic, H&M's arch-rival Gap Inc chalked up a thumping 25  %  fall in November sales, rounding the bad news off with a profit warning.

But H&M is just one example of the tidings of joy borne by retail chains across Europe. In Britain, recent retail reporters such as Great Universal Stores, Allders and Sainsbury's all chorused the good news.

Britain's Office for National statistics said UK retail sales had increased 1.3% in November, the largest month-on-month percentage increment in almost a year.

It's not just Britain. French shoppers pushed spending to exceptional levels at two of Paris' flagship department stores in the first Sunday shopping day in the run-up to Christmas. On that day alone, Parisian shoppers spent 33.9 million francs ($4.6m) at Le Printemps department store on the Boulevard Haussman, and 26 million francs ($3.5m) next door at Galeries Lafayette.

In Netherlands, economist commented on the prevailing mood in the country "What consumers think about the economy is mostly determined by what they read in the newspapers - companies going bankrupt, a slowdown in economic growth. But unemployment in the Netherlands is not increasing sharply and the value of houses isn't falling. Share markets are performing weakly, but there are more Dutch owning their own houses than owning shares."  

This doesn't explain everything, of course. One of the main factors behind perky consumer activity in Europe is the suite of interest rate cuts by the European Central Bank (four cuts this year totaling 150 basis points).

But the US Federal Reserve has cut rates, too, slashing its headline rate to 1.75%   from 6.50% in January in a bid to counter a sagging economy and the psychological blow of the September 11 attacks on New York and Washington.

Jerome Bedier, president of France's traders and retailers federation, had a further explanation. He believed December 2001 could be marked what he called "overconsumption" due to "precautionary buying" ahead of the adoption of euro notes and coins on January 1.

Back in Stockholm, there is a pragmatic explanation for a boom in Christmas present buying because many people have cancelled their Christmas vacation trips abroad, and so they have more to spend on presents.

USA: Apparel Retailers Hit Hard By Shopping Slump

US shoppers proved picky in their spending over Christmas ignoring many last-minute pre-Christmas specials on apparel and luxury items, as economic worries continued to depress consumer sentiment.

Apparel retailers like Federated Department Stores Inc are among the companies hardest-hit by shoppers' new-found frugality.  Shoppers are reluctant to commit themselves to spending on items they deem non-essential in light of the continuing fallout in unemployment

The overall US same-store sales in the first 24 days of the holiday shopping season rose 1.8 per cent year-on-year, down from growth of 2.4 per cent a year earlier.

Wal-Mart Stores Inc, whose business has received a boost from consumers' search for value, also said business at its discount stores was also a bit disappointing in the December 8-14 week.

Bentonville, Arkansas-based Wal-Mart said while goods such as Christmas trees and lights sold well in that week, sales at its discount stores trended "slightly below plan."

Kmart, which has been losing ground to its larger rival Wal-Mart, said on Monday in its weekly sales update same-store sales for the week ended December 12 were slightly below plan for the month, which pegged an increase of nil to 2%.

To make things worse, apparel retailers such as the Gap Inc - the largest US clothing chain - have continued to slash prices to try to lure shoppers, a step which hurts profitability.  Gap had 543 markdown items in the week versus 189 last year.

Most retailers, particularly those in apparel, were headed for the worst Christmas in a decade.  There is a confluence of risk factors that have been building up for a decade at the retail bubble.

Analyst expected the outcome of this holiday shopping season to lead to some consolidation in the retail sector, which has been plagued by sluggish sales and weak profits since late last year.

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