IF YOU THOUGHT the report that the U.S. economy grew at an annual rate of 7.2 percent was good news, wait until you see the revised estimate. I am told that the final figure will be at least 7.8 percent, and might well reach 8.0 percent.

So much for the look in the rear view mirror. The more important question is whether the road ahead will provide a smooth ride to a sustained period of economic growth or prove as bumpy as the one over which we have recently traveled. We may get the answer as the Christmas shopping season unfolds.

The season starts on the Friday after Thanksgiving Day, known in the retail trade as Black Friday (black, as in the black ink that is generated for retailers on this, the busiest shopping day of the year). However, we are no longer able to date the season's end: Consumers have become accustomed to postponing purchases until the January sales bargains.

The good news for retailers comes from the pollsters. A recent Gallup poll reports that consumer spending intentions are more positive than they have been since the Twin Towers came down on September 11. Gallup analysts say that retailers have reason to be "extremely optimistic" about the coming selling season.

Beware of polls of consumer intentions, warns Karlyn Bowman, doyenne of Washington poll analysts. She points out that we just don't have enough historical data to determine the extent to which intentions are matched by actions. That, of course, is a warning dear to the hearts of economists, who prefer to look at hard data rather than what consumers say they intend to do before exposing themselves to the temptations of the malls (66 percent tell Harris Interactive pollsters they will do some of their shopping in malls), or the Internet (47 percent of online adults say they intend to shop via the Internet).

SOME OF THE DATA are not encouraging. After disposing of the bulk of their tax refunds in a summer shopping spree, consumers reined in their spending in September and October. They might be concerned about the level of their outstanding debt. Immediately before the slowdown in retail sales, consumers increased credit-card and other debt at an annual rate of 9.7 percent, by $15.1 billion, the largest jump since January.

Economists at Goldman Sachs see still other reasons for consumer caution. The slowdown in household spending, they say, "probably reflects a fading of the fiscal stimulus as well as a deceleration in hourly earnings growth. . . ."

Still, it is possible that consumers are merely catching their breaths before a final assault on the nation's shops. The National Retail Federation is expecting sales in this holiday season to top last year's by 5.7 percent. That might be a bit optimistic. John Bucksbaum, CEO of General Growth Properties, a Chicago-based Real Estate Investment Trust that owns or operates some 160 malls around the country, said that he is expecting "a positive sales season," with growth in the 3 to 4 percent range. That, he says, will make retailers quite happy.

Supporting the optimists is the fact that sales of luxury goods have been robust. This is good news for the rest of the trade since they are thought to be a leading indicator for sales of more modestly priced goods.

Most important, retailers seem willing to back their optimism with hard cash. They took on 30,000 more staff in October than in September, the largest monthly increase since February 2001. The Wall Street Journal reports that Coach Inc., which specializes in high-end leather goods, is planning to have 50 percent more staff serving its customers this year than last, while at the other end of the market, "pile-'em-high-and-sell-'em-low" Costco Wholesale Corp, with sales already running 11 percent ahead of last year, is planning to add as many as 7,000 workers (a 10 percent increase) and raise the number of hours for its regular staff. Costco, says Fortune magazine, may be a fifth of Wal-Mart's size, but it is "the only company Wal-Mart fears." Gap, the clothing retailer that has seen difficult times, is planning to hire more than 20,000 holiday workers, a 33 percent increase over last year.

But although healthy sales volumes boost jobs and the economy, they are no guarantor of healthy profits. Consumers have become accustomed to margin-shrinking prices, which explains why Wal-Mart now takes in ten cents out of every dollar spent in American shops, and some analysts expect it to be racking up $1 billion in sales every day in the not-too-distant future. If that happens, Wal-Mart, even though it last week reported earnings that fell short of analysts' expectations (despite a 13 percent growth in sales), will do more business in 10 days than Macy's, Bloomingdale's and all the other stores in the Federated chain now do in a year.

BUT EVEN MIGHTY WAL-MART saw its margins fall last month for the first time in five years, and soft-goods retailers such as department stores continue to see consumers looking for real value for money. Prices of big ticket items also remain under pressure. General Motors has responded to a 7 percent decline in October sales and rising inventories by increasing rebates on its big SUVs to $3,500 (a $1,000 jump). Alternatively, consumers can get 48-month loans with no interest charged. And margins on the giant, 50-inch television sets that have captured consumers' fancies, even at prices well above $5,000, are far below those on, say, some stereo equipment, and are expected to fall as production increases and Wal-Mart gears up to sell these sets.

Still, most analysts are guessing that low inventories of many goods will enable retailers to be better able to hold the line on prices than in recent years. If they are right, and consumers postpone the chore of whittling down the size of their debt mountain until after Santa Claus has returned to his North Pole lair, retailers might join the manufacturing and service companies that are participating in the current profits upturn.

Irwin M. Stelzer is director of economic policy studies at the Hudson Institute, a columnist for the Sunday Times (London), a contributing editor to The Weekly Standard, and a contributing writer to The Daily Standard.

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