Future May Hold Pleasant Surprises for Retailers - Feb.2001

According to some retailers, the press has almost been trying to talk the economy into stalling. While sales figures were down for the holidays compared to last year, it seems the future may not be as bleak as otherwise reported.

The year started out with gloominess for many, as expectations dropped and confidence was seen slipping. Early reports from January, however, showed

that Americans are spending more than predicted. Analysts, meanwhile, continue to hold steadfast the belief that the economy will rebound by the next holiday season.
As the jewelry industry approaches the first shows of the year with caution-jewelers at the show in Vicenza, Italy, for example, were buying cautiously-other industries are showing strong and unexpected results. One automotive company, for example, cancelled plans to shut down two plants after consumer demand came roaring back in 2001.

Retail sales at major department stores, meanwhile, are up by about 4% for the month.

The New York Times reports that corporate profits and investment spending may fall, but cites tight labor markets and interest rate cuts as keeping the economy expanding.
A Reuters poll forecasts the economy will slow to 1.1% annualized growth pace in the first quarter of 2001 (from around 2 percent at the end of 2000). The forecast predicts, however, that growth will recover to 3.4 percent at the end of the year.
The National Retail Federation’s Chief Economist agrees.

"Our forecast is that we will experience a slowdown that, with the Fed's help, will not end in a hard landing," says Rosalind Wells. "With the Fed easing monetary policy early in the year, we anticipate a re-acceleration of growth later in the year."
The NRF says there is no hard evidence of an economic slowdown, citing U.S. Commerce Department statistics that holiday sales in items like apparel and accessories were 5.3% higher than 1999.
But the good news doesn’t seem to have reached American jewelers — according to reports, sales last Christmas were flat, and in January they are doing best with smaller diamonds and other lower-priced merchandise. Retailers in other industries say that consumers are cautious, yet still buying luxury items like automobiles, boats and yachts.v

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