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The good news is the recession appears to be turning. The bad news is few are predicting an easy or fast recovery.
SNEWS® knows the current economic state is important for your business. This is one look at different ways it’s affecting our industries and your business in a periodic and ongoing series of stories in SNEWS. This time around we take a look at all the conflicting economic indicator information that has been shouting out at us from headlines in the month of September. Stay tuned for more in-depth reporting on the current situation as it develops and changes, from interviews with experts, closer looks at small businesses and how they are coping, to economic statistics, breaking news and how it affects consumers.
With somewhat contradictory economic indicators coming out this month, two choices remained: Start slamming shots of tequila — or try to distill the data. So, here’s our look at what September’s wave of economic indicators might mean.
Of course, there are a lot of open questions: What will the latest economic forecasts mean in your store? Will consumers really emerge from this recession with a lasting preference for lower-priced goods over top shelf brands? Is the commercial real estate market in a lasting funk? How will all of this affect a recovery in the recreation, outdoor and fitness markets?
Consumers are likely to hold back on spending this fall, making for a conservative holiday season, Pam Goodfellow, senior analyst at BIGresearch told SNEWS. “It doesn’t look like a banner year” for holiday sales, she said.
“Consumers are very hesitant right now.”
As might be expected, the outlook for the road ahead tends to be a glass-half-full, glass-half-empty situation. That’s not too surprising because of the variety of economic trend info recently released.
At a glance:
>> The Conference Board: leading economic indicators rose for the fifth month in a row.
>> Federal Reserve: 11 of 12 regions reported economic improvements meaning some stabilization is in process.
>> BIGresearch American Pulse: 4 in 5 Americans said they don’t believe the recession is over.
>> U.S. Census: Data released Sept. 21 suggested the recession has had sweeping impact on American life.
>> Consumer Reports Sentiment Index: the lowest level in months.
>> Unemployment: Remained high in August — 12.2 percent in California; 9.7 percent average across the nation.
>> Commerce Department: Sales at U.S. retailers surged in August by the most in three years.
>> Monthly Retail Trade Survey: Sporting goods stores sales drop over the last six months.
>>Hay Group Survey: 40 percent of retailers cutting hiring for Christmas season compared to last year despite an increase in applications received.
>> And at least one top economist insisted forecasters underestimate recoveries – and are doing so again.
Economists cheered the week of Sept. 21 when the Conference Board said its leading economic indicators (LEI) index increased for the fifth consecutive month in August. The index rose 0.6 percent in August following an upwardly revised 0.9 percent increase in July, the Conference Board said.
“Since reaching a peak in July 2007, the LEI fell for 20 months — the longest downtrend since the mid 1970s — but it has been rising since April and its gains have become very widespread,” Ataman Ozyildirim, economist at the Conference Board, said in a statement with the report.
Ken Goldstein, also a Conference Board economist, added that the data “suggests that the recession is bottoming out. These numbers are consistent with the view that after a very severe downturn, a recovery is very near. But, the intensity and pattern of that recovery is more uncertain.”
Also fueling hopes of a broader recovery, the Federal Reserve on Sept. 9, issued its report saying the recession is easing in 11 of 12 Federal Reserve Bank districts. Only one district, St. Louis, reported a downward slide of economic activity.
The Fed’s snapshot gels with predictions by Fed chairman Ben Bernanke that the economy has started to grow again.
But the majority of Americans aren’t so sure. Many apparently disagree with Bernanke’s optimism, specifically his statement that the recession is “likely over.” According to an American Pulse survey by BIGresearch of about 7,000 people released last week, more than three of four disagree with his view.
When consumers start seeing a change with their own eyes, then they’ll believe the reports out of Washington, Goodfellow, of BIGResearch, said in a telephone interview with SNEWS.
“Consumers are saying they will believe these trends when their neighbors start selling homes that have been for sale for the past year, when companies start hiring again or when their own jobs feel secure,” Goodfellow told us.
Impacting U.S. lifestyle
The recession has had a sweeping impact on American life, according to U.S. Census Bureau data released Sept. 21. The Census Bureau’s ongoing American Community Survey data suggested people are spending more time stuck in traffic, are less likely to relocate, and are more likely to delay marriage and home ownership.
Indeed, there is ample evidence that Americans still feel worse about that financial situation than they have in months, according to the September Consumer Reports Sentiment Index.
“Despite the negative forces consumers are facing, we have seen some stabilization and improvement in key indicators that suggest we could see an improvement in consumer sentiment over the next month,” Ed Farrell, director of the Consumer Reports National Research Center, said in a press release about the index.
For the sixth consecutive month, the Monthly Retail Trade Survey, prepared by the U.S. Census Bureau, reported a drop in sales in sporting goods stores. For the most recent reporting month (July), sales fell 1.7 percent after dropping 3.1 percent in June. Without a strong January (sales up 7 percent), year-to-date sales would be even more negative, according to a National Sporting Goods Association monthly report, which crunched the numbers.
In another economic indicator, the Commerce Department said earlier this month that sales at U.S. retailers surged in August by the most in three years. The 2.7 percent increase exceeded economists’ forecast.
Sunnier skies ahead
While some see a sluggish recovery, at least one prominent economist forecasts a sunnier revival. Michael Mussa, former chief economist of the International Monetary Fund, said he believes most forecasters underestimate recoveries.
“The great global recession of 2008 and early 2009 is over and world recovery is now under way,” said Mussa, now a senior fellow at the Peterson Institute for International Economics. He delivered his findings at a Sept. 17 research organization event in Washington. While most forecasters fear a “double dip,” in which economies fall back into a recession, Mussa said a V-shaped recovery — a steep recovery following a deep recession — is “the most likely course.”
Mussa concluded his 25-page report with an upbeat assessment: “Qualitatively, I anticipate the growth over the next year and half or so will significantly exceed most forecasts and that the unemployment rate will come down a far bit more than generally anticipated.”
Looking ahead past the current economic storm, keeping employees might be more challenging. Typically low turnover rates during a downturn tend to surge during recoveries.
“Instead of celebrating the upturn, many corporate leaders may face a new problem: replacing lost employees as the economy kicks into gear and talent is once again a scarce commodity,” according to the July issue of Deloitte Review.
Proceed with caution, seems to be the advice from the top. In a Sept. 14 interview with Bloomberg News, President Barack Obama said job losses are “bottoming out” and pointed to gains in exports and manufacturing as hopeful signs for the U.S. economy.
“I don’t think we’re out of the woods yet,” Obama told the business news agency. “What we have to be careful about is taking the crutches away from the patient too soon.”
With such unrestrained optimism, it looks like we’re saving that appointment with Dr. Cuervo for after the recovery kicks in.
SNEWS is looking at different ways the economy is affecting our industries and your business in a periodic and ongoing series of stories. Stay tuned for more in-depth reporting on the current situation. Email us at email@example.com with any tips, comments or ideas on stories you’d like to see.