The retail industry’s biggest booster group, The National Retail Federation, expects sales in the industry to rise 2.5% next year. It bases its conclusion on an anticipated increase in consumer spending and a drop in unemployment.
Retail sales fell 2.5% last year, so a modest improvement in 2010 does very little to help the most cash-strapped and customer-hungry companies in the industry.
“While we still expect shoppers to continue to be frugal with their discretionary spending, retailers will soon be able to reap the benefits of leaner, smarter inventories and a year and a half of pent up consumer demand,” NRF Chief Economist Rosalind Wells said. The problem with the forecast is the pent-up demand, if it exists, cannot manifest itself in a time of high unemployment. The demand that the NRF expects may not return to the consumer markets for years, if ever. The American consumer, so badly burned by the recession, has learned to live with less, buy less, and take on less credit.
Another flaw in the NRF forecast is the lack of available credit for consumers. Credit card companies have been methodically weeded out their weakest customers while putting restrictions on the balances of others. Accounts which have gone unused for certain periods are simply closed.
The NRF may end up being right, but the recovery in the consumer economy would have to be stronger than it is now.
Douglas A. McIntyre
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