ROSY SCENARIO may be the belle of the Christmas ball, but she is due to be replaced by her only slightly less ebullient cousin, Goldilocks, in the New Year. All the signs are that retailers in America will have a merry Christmas, to be followed by a slowing but still healthy economy in 2007.

Consumers are in a rather good mood, much cheerier than at this time last year, according to the University of Michigan Consumer Sentiment Survey. With reason, according to the Bush administration, which released its updated economic forecast last week. The figures have been revised down from earlier guesses to reflect the housing slowdown, but they paint a far from gloomy picture.

Inflation-adjusted growth is expected to come in at 3.1% this year, and 2.9% in 2007. Perhaps more important, real wages have started to rise noticeably — a full-time production worker will take home almost $1,000 more than he did last year. That won’t end the debate about inequality, especially as Wall Street firms are about to hand out multi-million-dollar bonuses and investigators are digging into corprocrats’ practice of backdating their share options, but it should make most consumers feel in a spending mood in the next few weeks.

It is increasingly difficult to predict sales during the Christmas shopping season because that season no longer has clear starting and end points. Many consumers have already done some of their shopping, and others were lining up at shops and malls that opened at midnight on Thursday, giving the hardiest shoppers only a few hours to digest their Thanksgiving turkey dinners. Many of these consumers bought gift tokens, which now account for 5% of total sales. Some $20 billion of these tokens won’t be cashed in until next year, and therefore won’t be counted in this season’s sales.

That said, the current state of consumer confidence has historically been associated with year-on-year seasonal sales growth of between 4% and 8%. With petrol prices down, incomes up, discounts available on all sorts of goods, from flat-screen televisions to Elmo toys, the National Retail Federation expected 137m people to storm the shops between Friday and today. Retailers, expected by consultants Challenger, Gray & Christmas (that’s right) to hire some 700,000 people to make certain that customers are being served, will find margins reduced by price cutting, but they won’t be left with costly inventories of unsold goods.

If the consumers do splurge, they will be handing most economists a bit of a surprise. Most professional forecasters are convinced that the recent decline in house prices will dampen consumers’ willingness to spend. Todd Lavieri, chief executive of Archstone Consulting, predicts that sales this season will top last year’s by only a modest 3%, in part because of the effect of the decline in the housing sector, and in part because this will be “a line extension Christmas”, with no new blockbuster products to tempt the so-called early adopters.

Whatever the sales total turns out to be, traditional department stores are likely to regain some market share, especially if clothing sales grow as expected. Wal-Mart is struggling to top last year’s performance, while Nordstrom, Neiman Marcus and Macy’s have smartened up their stores and are offering more of what consumers want to buy.

When Rosy has had her twirl around the shops, Goldilocks might take over. Start with this: the Bill & Melinda Gates Foundation revealed last week that it has taken positions in seven home-building companies. This puts the Gateses in line with two-thirds of the economists surveyed by The Wall Street Journal. They agree with the former Federal Reserve Board chairman Alan Greenspan that the worst is over for housing, or soon will be, and that the run-down in inventories, lower prices, and demographic trends portend a snap-back some time next year.

That would do a great deal to make the White House forecast of 2.9% growth prove a bit too pessimistic. With Fed chairman Ben Bernanke apparently satisfied that the economy has slowed sufficiently to make further interest-rate increases unnecessary, and a softening dollar spurring exports, the table is set for Goldilocks to experience an economy that is not too cold, not too hot, but just right.

There is more good news. Rob Portman, the former US trade representative who was promoted by President George Bush to run the Office of Management and Budget when his economic team needed strengthening, was so eager to get the administration’s story out that he had me around for a lunch of fruit salad, data and charts. The charts show that the nation’s fiscal position is stronger than most analysts realise: the federal budget deficit will fall below 2% in 2006, and decline after a 2007 blip to under 1%.

Portman is also optimistic that the president will be able to head off the new protectionist pressures likely to come from a Democratic Congress, and that Bush’s growth-inducing tax cuts, which Portman emphasises have increased the portion of total individual income taxes paid by the top 5% of earners, will survive the new Congress.

No sunny economic outlook is ever entirely free of clouds, of course. Higher spending for Iraq will put pressure on the budget and deficit; Opec might decide to cut output enough to drive oil prices back closer to $70 a barrel if the American economy, and with it oil demand, start to grow rapidly; a dollar collapse might force the Fed to raise interest rates.

But for the moment, ’tis the season to be jolly.

Irwin Stelzer is a business adviser and director of economic policy studies at the Hudson Institute.