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  • Faust
    kitsch killer
    • Sep 2006
    • 37852

    Americans Sharply Cut Back on Spending - NYT article.



    Interesting article. Doesn't reflect the realities of SZ, of course [86]



    http://www.nytimes.com/2008/01/14/bu...hp&oref=slogin




















    January 14, 2008



    Americans Cut Back Sharply on Spending











    Strong evidence is emerging
    that consumer spending, a bulwark against recession over the last year
    even as energy prices surged and the housing market sputtered, has
    begun to slow sharply at every level of the American economy, from the
    working class to the wealthy.




    The abrupt pullback raises the possibility that the country may be
    experiencing a rare decline in personal consumption, not just a slower
    rate of growth. Such a decline would be the first since 1991, and it
    would almost certainly push the entire economy into a recession in the
    middle of an election year.




    There are mounting anecdotal signs that beginning in December
    Americans cut back significantly on personal consumption, which
    accounts for 70 percent of the economy.




    A raft of consumer companies ? high-end stores like Nordstrom and Tiffany, and middle-of-the-road ones like Target and J. C. Penney ? reported a pronounced slowdown in growth last month, and in several cases an outright drop in business.




    American Express
    said that starting in early December the growth in the rate of spending
    by its 52 million cardholders, a generally affluent group of consumers,
    fell 3 percentage points, from 13 percent to 10 percent, the first
    slowdown since the 2001 recession.




    And consumer confidence, an important barometer of economic health, has plunged. Andrew Kohut, president of the Pew Research Center, says consumer satisfaction with the economy has reached a 15-year low, according to the firm?s polling.




    Even wealthier consumers, who were seen as invulnerable to rising
    gasoline prices and falling home values, are feeling the squeeze.




    ?People are clearly concerned that we are headed into a recession,?
    said Stephen I. Sadove, the chief executive of Saks Fifth Avenue, the
    upscale department store whose runaway growth throughout much of the
    year slowed markedly in December.




    Gia Trumpler, 37, a travel consultant who lives in Manhattan, shops
    at luxury chains like Saks. But she is trimming costs where she can by
    bringing lunch to work from home, rather than eating out. ?Everything
    just feels more expensive to me now,? she said, including the cost of
    heating her apartment this winter.




    There are plenty of recession naysayers. Average hourly wages and
    salaries have not fallen, and some economists argue that unless ? or
    until ? that happens, consumer spending will hold up despite widespread
    economic unease. According to these economists, what happened in
    December was a temporary blip.




    ?Incomes have managed to hold up,? said Chris Varvares, president of
    Macroeconomic Advisers, an economic forecasting firm, who added that
    the data to date did not support the view that a recession was
    inevitable.




    Even in tough economic times Americans rarely reduce their
    consumption, preferring instead to slow the growth in their spending.
    Since 1980, they have cut spending in only five quarters ? a total of
    15 months ? most of them in the depths of a recession. The 2001
    recession passed without a cutback in consumer spending.




    Only once before, in 1980, did consumer spending fall during a presidential election year, helping Ronald Reagan in his campaign against Jimmy Carter, the Democratic incumbent.




    Official statistics do not yet show that consumer spending has
    dropped, but they do suggest that in late 2007, it slowed in areas like
    automobiles, furniture, building materials and health care, said Mark
    M. Zandi, chief economist at Moody?s Economy.com.




    Fresh evidence of a pullback is pouring in from many quarters as
    Americans confront the triple threats of higher energy costs, falling
    home prices and a volatile stock market.




    Perhaps the strongest barometer over the last 30 days is the
    performance of the country?s big chain stores. December turned out to
    be a blood bath for retailers at every rung on the economic ladder,
    with sales for the month growing at the slowest rate in seven years.




    Sales at stores open at least a year, a crucial yardstick in retailing, plunged by 11 percent at Kohl?s and 7.9 percent at Macy?s, compared with last year.




    Chains that cater to the middle and upper classes, which have
    benefited from years of trading up ? when customers splurge on select
    expensive products ? struggled as well. Coach,
    the leather goods maker, said sales of its popular handbags had become
    sluggish, prompting the company to issue rare coupons to drum up
    business.




    ?This is the real deal ? consumers are slowing down across the
    spectrum,? said David Schick, a retail analyst at Stifel Nicolaus.




    But it is the trouble at the highest reaches of retailing that has
    economists most worried about a recession. Over the last year, even as
    low-wage and middle-income consumers have cut back, the wealthy have
    spent freely, keeping high-end chains insulated from the economic
    turbulence.




    That started to change in December, as shoppers held off on buying
    $300 designer shoes and $500 dresses. For example, store sales fell 4
    percent at Nordstrom, the high-end department store.




    And Tiffany, the upscale jeweler, said the number of purchases at
    its stores dropped last month. In an interview, its chief executive,
    Michael J. Kowalski, said that even if the wealthy remain so at least
    on paper, their economic anxiety is taking a toll.




    ?It?s a reaction to the general economic uncertainty everyone is
    feeling,? he said. ?There are housing price declines and financial
    market instability. There is a lot of caution out there, and it?s
    reflected in jewelry sales.?




    At the same time, the number of overdue payments on American Express
    cards is surging, the company said ? and this among well-heeled
    cardholders who charge up to $12,000 a year, on average, on each card.
    American Express has called some cardholders in the last few weeks to
    ask if they will have trouble paying their bills.




    ?We are seeing a correlation with housing prices,? said Michael
    O?Neill, a spokesman for American Express. ?The falloff in spending is
    everywhere in the country, but it is greatest in those areas like south
    Florida and California, where home prices have fallen the most.?




    The big exception is gasoline. American Express and the Consumer
    Federation of America say that consumers are buying just as many
    gallons as ever, but paying more for them, and that has forced cutbacks
    in other purchases. Gasoline prices usually drop after the summer
    driving season, but this year they shot up, from $2.85 a gallon on
    average in September to $3.07 in December and $3.15 in the first week
    of January.




    A similar trend is evident in the cost of natural gas, electricity
    and home heating oil. ?We built these big houses in the suburbs, which
    need a lot of energy to stay warm and a car to go shopping,? said
    Stephen Brobeck, executive director of the Consumer Federation. ?And we
    can?t change that quickly.?




    The impact of rising gasoline prices ?is just profound on middle-
    and lower-income families,? said Mr. Kohut of the Pew center. ?Our
    surveys are showing one of the lowest levels of satisfaction with
    national conditions in any recent presidential election year. You have
    to go back to 1992 to get a lower number of people saying the national
    economy is excellent or good.?




    The nation was recovering from recession that year. Consumer
    spending had contracted in two separate quarters in 1991, and while
    economic growth was gradually accelerating as Bill Clinton and George H. W. Bush
    sought the presidency, the Clinton camp famously posted a sign in its
    campaign war room proclaiming, ?It?s the economy, stupid.?




    There are some bright spots now in consumer spending. Sales of
    sports gear and electronic gadgets ? particularly G.P.S. navigation
    devices and flat-panel television sets ? have risen over the last three
    months. To Stephen Baker, vice president for industry analysis at the
    research firm NPD Group, that suggests there is still enough purchasing
    power for people to buy what they really want.




    ?We probably would not have seen strong sales for electronics
    products that people really want if the overriding issue was economic,?
    Mr. Baker said.




    But not everyone is splurging. Jinal Shah, 22, a college senior in New York, said she wanted to buy the popular Nintendo
    Wii video game system as a gift for herself this holiday season, but
    had second thoughts because of the $250 price tag. She ended up not
    purchasing it.




    ?You have to make choices,? she said. ?I get the Wii, or I go out more. I am just much more aware of the tradeoff now.?






    Louise Story contributed reporting.



























    Fashion is a form of ugliness so intolerable that we have to alter it every six months - Oscar Wilde

    StyleZeitgeist Magazine
  • philip nod
    Senior Member
    • Aug 2007
    • 5903

    #2
    Re: Americans Sharply Cut Back on Spending - NYT article.

    i've noticed things aren't selling so well on the SZ classifieds lately [:O]
    One wonders where it will end, when everything has become gay.

    Comment

    • Faust
      kitsch killer
      • Sep 2006
      • 37852

      #3
      Re: Americans Sharply Cut Back on Spending - NYT article.

      Related news,


      Retailers Face Rough 2008



      NEW YORK ? It ain?t pretty out there and it isn?t going to get much better for at least six months.



      That was the consensus among the record crowd of retailers attending
      the 97th annual National Retail Federation convention at the Jacob
      Javits Convention Center here last week. ?They?re looking for answers,
      and to commiserate with colleagues,? said NRF?s CEO Tracy Mullin. She
      cited a ?tremendous? increase in attendance from an expected 17,000 to
      over 18,000.



      In years past, things like markdown optimization and RFID created the
      stir. But last week?s convention was all about recession?whether it?s
      arrived or is on the horizon?and all the external factors that are
      bringing stores down.



      Overall, NRF is projecting retail sales will grow a modest 3.5 percent
      next year with a pickup in the second half, the slowest growth in five
      years.



      In a press conference, Rosalind Wells, chief economist, said that the
      ?challenges will be formidable for everyone? in 2008 due to ?the
      slowing economy and subdued spending. Consumers will be under financial
      stress from high energy costs, the fallout from the housing slump, and
      sluggish employment and income growth. Shoppers will seek to pay down
      debt, spend more in line with income growth and approach discretionary
      purchases with more restraint ... even areas of past high growth like
      luxury goods and online shopping will feel the pressure.?



      Wells said NRF expects sales to rise 3.2 percent in the first half and
      3.8 percent in the last six months. Specifically, she said apparel and
      accessories stores should expect ?average sales gains unless some
      exciting fashion trends? emerge. ?There?s nothing out there to
      stimulate consumer demand.?
      (shit, I think they've been trailing my closet)



      Even the luxury sector, which has been largely immune from the economic
      downturn up until now, will moderate, Wells predicted. Although these
      stores are expected to continue to outperform the more-moderate
      retailers, they will also feel the impact of a jittery consumer.




      Although lower-to-middle-income consumers are expected to be most
      affected by the macro-environment, discounters may actually benefit as
      shoppers begin to shop down-market, Wells added.



      NRF also reported that holiday sales were actually worse than
      projected, rising only 1.7 percent unadjusted over last year and
      actually decreasing 0.4 percent, seasonally adjusted from November. In
      addition, November retail sales were revised downward to 4.7 percent
      growth from the initial 5.1 percent that was reported last month. As a
      result, holiday season sales, which combine November and December, rose
      3 percent to $469.9 billion, weaker than NRF?s projected 4 percent
      forecast for the season. In 2002, sales rose 1.3 percent.



      Specifically, apparel and accessories store sales fell a seasonally
      adjusted 2 percent in December to $18.6 billion while department store
      sales dipped 0.4 percent to $17.2 billion, according to the Commerce
      Department.



      Retail stocks are expected to struggle through the first half of the
      year, reflecting the macroeconomic downturn. Since early November, the
      S&P Retail Index has lost 17 percent of its value, and since the
      first day of trading this year is down 7.4 percent. Weak macroeconomic
      reports on housing, inflation, consumer confidence and consumer
      spending are blamed for the bearish pullback of the sector.



      At the NRF convention, store closings were on everybody?s mind.
      ?Usually, we see 2 to 3 percent [of a chain?s store base] pared at the
      end of the year. It will be bumped up to 5 to 6 percent this year,?
      said Brian Tunick, managing director of equity research, specialty
      retail at JP Morgan, in a session on real estate. ?There?s been
      negative mall traffic for five years. What is going to happen if
      consumers really slow down? If mall traffic gets even more negative,
      some companies are really going to feel pinched.?



      ?Everyone is slowing down square-footage growth,? said Deborah
      Weinswig, managing director and senior analyst at Citigroup. She
      characterized 2007 as ?the most difficult year in my career of 11
      years. ... Everybody was shocked at the speed of how sales slowed.?
      Asked if she believed a recession is coming, she replied, ?I am there
      now.?



      On the bright side, J.Crew, Zumiez, Hollister, Urban Outfitters and
      others were mentioned by analysts as on the upswing. In addition,
      consumer perceptions of Wal-Mart are improving, after the world?s
      largest chain instituted sustainability and green store programs, and
      experienced a better Christmas season than Target.



      Another bright spot within the retail sector is online shopping.



      In a session at NRF entitled ?The State of Online Retailing,? Sucharita
      Mulpuru, senior analyst for retail at Forrester Research, predicted
      that the exponential growth e-commerce has experienced in the last
      several years will continue. But retailers must smooth out the kinks in
      their online channels in order to maintain the momentum, she warned.
      (Browns staff, are you reading this?)



      ?E-commerce has experienced consistent, 20-plus percent growth in the
      last three years, and I believe it has many years of strong
      double-digit growth ahead of it, in spite of the fact that we may be
      headed into a recession and in spite of the fact that other parts of
      retail may be experiencing challenges,? Mulpuru said.



      ?The overall growth of online retail is so much more rapid than the
      growth of retail overall,? she added. ?We predict cross-channel sales,
      which are either transacted online or influenced by the online channel,
      will top $1 trillion by 2012.? That figure would represent nearly 30
      percent of all retail sales, she said.



      Although most shoppers still vastly prefer going to a store than
      purchasing online, closing this gap requires modifications to the
      fundamental operation of Web sites. ?Online retailers experience that
      delta between the online channel and the brick-and-mortar channel
      because in many cases they still have not nailed the basics.?



      She outlined several hurdles the e-commerce industry needs to overcome
      to reach ?that 20 percent growth number?that $300 billion.?



      One is that while consumers are seeking convenience, wider selection
      and better prices, Web sites aren?t always accessible due to technical
      problems. Key information is often missing, and package delivery is a
      ?sore spot? for many customers. By paying closer attention to these
      factors?what Mulpuru called ?the low-hanging fruit??when constructing
      and maintaining their e-commerce sites, retailers will be able to
      retain traffic and increase sales.



      Additionally, she said, retailers need to employ market-research teams
      and collect consumer data to replicate successes and understand trends
      or market-share shifts.



      Ira Kalish, global director of Deloitte Research, said the economic
      downturn could put downward pressure on oil prices, though the
      declining dollar could increase it. For now, however, oil prices are
      impacting food prices, and overall, there is a more inflationary
      environment globally. ?We are already seeing a major slowdown in
      consumer spending.?



      Fashion is a form of ugliness so intolerable that we have to alter it every six months - Oscar Wilde

      StyleZeitgeist Magazine

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