Posted on 11/23/2002 8:31:34 PM PST by Willie Green
For education and discussion only. Not for commercial use.
Debra Hentschel doesn't have to dig through economic data to know shoppers aren't feeling flush these days. She sees it firsthand in her job selling shoes at a department store.
"We have to wait for customers," she said. "We never had to do that before."
Consumer spending has been one of the few bright spots in an otherwise dismal economy and a key protection against a deeper slump. But consumer confidence fell sharply in October after months of erosion, prompting new worries of a holiday-spending washout and a consumer meltdown, which could push the economy into a full collapse.
"Without consumers, there would be no economy at all," said Jim Haynes, president of the Behavior Research Center, a Phoenix polling company. "The attitudes of consumers are very important. It's kind of like an attitude that rumbles all the way through the economy."
Economy watchers track two monthly national surveys of consumer sentiment, plus the quarterly poll in Arizona. It's a key insight into the psychology of shoppers, providing a snapshot of how they feel and what they expect in months to come.
Consumer spending accounts for two-thirds of the U.S. gross domestic product. If people stop buying computers and TV sets, everyone from retailers like Best Buy to manufacturers like Intel and Microsoft feel the pain.
A shopping strike can be even more disastrous during the holidays, when retailers can ring up a quarter, or more, of their yearly sales. So far, signs aren't good for this year's season.
Behavior Research is seeing its worst quarterly readings in consumer confidence since 1993 as residents across the state fret about scarce jobs. State consumers increasingly are convinced that a turnaround won't come soon.
Here at home
Arizona mirrors the national picture. The Conference Board's monthly confidence index - already on the slide - also tumbled last month to 1993 levels with consumers unsettled about jobs, the threat of war and a sagging stock market. Consumer expectations for the next six months were down as well.
"I'm worried about the consumer," said Marshall Vest, University of Arizona economist. "They've been doing all the heavy lifting. They've been carrying the economy for more than a year. The consumer is getting tired."
If consumers are hitting the wall, they're doing so at the wrong time for retailers. Stores are hoping for a holiday bounce after a year of meager sales brought on by the terrorist attacks and extended by layoffs, corporate scandals and stock market malaise.
If shoppers won't shell out for the holidays, experts say there's little reason to expect consumer spending to continue carrying the economy. Most analysts predict so-so holiday sales, although some are optimistic that shoppers will splurge.
Britt Beemer, chairman of America's Research Group, a market research company in South Carolina, doesn't expect a blowout year. He looks for a 1.2 percent holiday-spending increase, noting that much consumer spending has been motivated by heavy price cutting such as zero percent car financing and half-off sales.
"It's taking extraordinary things to get consumers to buy this year," he said. "It's going to be like that at Christmas, too."
Beemer noticed something in his holiday research this year that he'd never seen: About a quarter of the people he talked to don't expect their pays to increase next year.
He said the figure never had been above 3 percent in any of his previous studies and the fear has been exacerbated by steep medical premium increases.
"People aren't worried about being fired," he said. "They're worried about being stuck in the same place all year financially."
Hentschel is seeing it all from the front lines of a Dillard's store at Paradise Valley Mall. The 29-year-old Phoenix women figures her shoe-selling commissions are down 30 percent to 40 percent. She's also expecting a flat holiday season. She and her husband will spend for their two children at Christmas but "might go a little chintzy" on gifts for themselves.
Cheryl Anderson, 28, a certified nursing assistant from Phoenix who works for a registry, said that her hours are down and her carpenter husband is working extra time to make up for a four-month layoff earlier this year.
"We used to spend more on the holidays," she said. "Not this year. I don't think people are into the holidays."
Dose of reality
Vest said consumers are just coming to terms that the good-time '90s are gone for good and are adjusting spending to realities. He said middle-aged consumers hit by losses in retirement plans now know that they might have to work more years. He also worries that there has been little effort by consumers to retire big loads of debt - something that must occur before a "meaningful recovery."
Business spending can lead the economy back to good times when consumers fall by the wayside, but Vest said companies crippled by accounting scandals and earnings restatements are in no shape to do that.
He sees potential for technology spending - servers and network components that need upgrades - and speculates that there's life in things like the cellphone business as consumers trade up.
Frank Badillo, senior retail economist at consultant Retail Forward in Columbus, Ohio, said that consumers haven't been doing all of the work carrying the economy. He said falling interest rates, stable prices and, in some cases, steady incomes have lent a hand.
Badillo said consumer confidence is a secondary player in the economy, reacting to such prime drivers as price changes and layoffs and heightening their impact.
He's interested in the divergence between how people feel now compared with what they expect in the future, and he worries when consumers start sweating it in real time, which he's just starting to see.
Vest places more importance on consumer attitudes and impact on the economy. If consumers retrench, he said, the economy will tank and the only thing left will be the argument over whether it's a double-dip recession or a continuation of hard times.
And he uses a non-esoteric indicator to tell him how consumers feel.
"If sales fall off at Wal-Mart, I think we're in trouble," he said.
I plan to drop some money at Sears and Target this Christmas season.
It's supposed to go down to 32° in Wilmington tonight.
Probably a lot of people looking for an inexpensive way of staying warm.
I think that's what they're worried about.
Look at the bad vibes that are being directed at Barbie:
Barbie Gets Hipper to Battle 'Bratz'
I spent about $40, came away with a lamp for my daughter-in-law and flowers for the cemetary.
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