The final tally for 2011 holiday sales will not be released until Jan. 12, but the early indications we have look promising.

The National Retail Federation on Dec. 15 raised its estimate for holiday sales to a 3.8 percent increase from 2010 — a full percentage point above its previous 2.8 percent estimate, while IHS Global Insight expects holiday sales to be 4.9 percent higher than last year.

Strong October and November sales — especially from Black Friday through Cyber Monday, the weekend after Thanksgiving — have given industry insiders reason for optimism. Since consumer spending accounts for about 70 percent of the United States’ total gross-domestic product, a positive performance for retailers should bode well for stock performance in the first quarter of 2012.

One interesting aspect of holiday sales that has been developing over the past several years is the growing importance of online sales and their impact on traditional “brick-and-mortar” sales, or sales in physical locations. Online sales for December are expected to be up about 10 percent over December 2010, IBM Smarter Commerce estimated last week, based on its analysis of transactions on 500 retail sites.

If the estimates for retail transactions of 3.8 percent to 4.9 percent for overall 2011 sales gains over 2010 are accurate, this means that brick-and-mortar sales will grow at a much slower pace than online — a trend we have seen consistently building over the past few years. More convenient shipping and return policies — with free shipping both to the customer and for returns — have made the online buying process much more attractive. Additionally, the increasing percentage of the population that is comfortable using the Internet on a regular basis is certainly contributing to the impressive growth we have witnessed in online sales in general.

One interesting wrinkle, in terms of the potential for strong stock performance next quarter resulting from positive holiday sales gains, is an increase in price levels this year over 2010, in relation to consumer spending levels. The latest data for the month of November for personal incomes and personal spending showed a 0.1 percent increase for both (reporting last week). Consumer spending adjusted for inflation grew almost 4 percent in the fourth quarter of 2010 while prices were declining. Estimates for the fourth quarter of 2011 are for growth of about 2.5 percent, far below last year’s level. At the same time, while prices were declining last year, we have seen the overall price level increase this year.

Weekly retail sales increases over 2010 have been strong, according to ShopperTrak, which estimates in-store holiday sales for last week were up 1.2 percent when compared with the same week a year earlier. This represented a 22 percent increase over the previous week and suggests that, after the dip we experienced after the Black Friday/Cyber Monday weekend, shopping has rebounded sharply.

Since the recession began in late 2008, retailers have been placing a significant amount of their total inventory on sale, starting on Black Friday (or even beforehand), and continuing to offer sales pricing through the entire holiday shopping period. This has had a direct impact on consumer shopping behavior, resulting in less motivation to get out and shop on Black Friday/Cyber Monday weekend (since consumers know they will be able to get great deals throughout the holiday shopping period). As a result, consumers are procrastinating and delaying their shopping even longer. This makes comparisons to previous holiday periods unreliable on a week-to-week basis.

Add to this that Christmas this year fell on a Sunday, leaving an extra Saturday just before Christmas to shop, and you have the makings for a very unique holiday shopping season in terms of spending habits and the tracking of sales data.

I believe there is a lot of pent-up demand for spending, as consumers have tightened their belts during this long-lasting recession, concerned about the economy, their jobs, etc. Despite lingering concerns about Europe, the national debt, the budget deficit, high unemployment (still 8.6 percent nationally), higher prices at the gas pump and a host of other issues, there are signs of consistent economic improvement. Unemployment has fallen to 8.6 percent from 9.1 percent over the past few months, housing data appears to be improving ever so slightly (although we still have a long way to go), and consumer confidence is improving — a better than expected 69.9 November reading on the University of Michigan’s Consumer Confidence Index, up from 64.1 in October. Consumers are ready for an economic recovery, and are ready to begin spending again.

I believe this holiday season is going to be very strong in terms of consumer spending, which will lay the foundation for positive stock price performance in the first quarter of 2012. Despite somewhat higher prices, and the steep discounts that retailers are offering to move inventories, I believe retailers overall will make good profits for the fourth quarter of 2011. As companies begin to report their fourth-quarter earnings, and as we get the final readings on sales for the holiday season, I feel that we will see stocks reacting favorably to the data.

I am optimistic that 2012 will be a transition year for the U.S. economy, and that we will lead the rest of the world out of recession and into recovery. Stocks should perform well in 2012, anticipating a more sustained recovery developing in the second half of 2012 and into 2013. From an investment standpoint, this scenario would make growth-oriented investment the most appealing with those assets that benefit most from a recovering economy benefiting the most.

— Craig Allen, CFA, CFP, CIMA, is president of Montecito Private Asset Management LLC and founder of Dump Your Debt. He has been managing assets for foundations, corporations and high-net worth individuals for more than 20 years and is a Chartered Financial Analyst (CFA charter holder), a Certified Financial Planner (CFP) and holds the Certified Investment Management Analyst (CIMA) certification. He blogs at Finance With Craig Allen and can be contacted at craig@craigdallen.com or 805.898.1400. Click here for previous Craig Allen columns. Follow Craig on Twitter: @MPAMCraig.