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Retail on the Up-Swing

July 2003

Second Half Will Shine, Analysts Predict

Retail performance reached a new high in June, according to an executive survey. According to the latest NRF-BTM Executive Opinion Survey, a monthly index by the National Retail Federation and the Bank of Tokyo Mitsubishi, retail performance for June rose to normal levels (50.8 %) for the first time since the survey’s inception in September 2002. The RSPI measures retail executives’ evaluations of monthly sales, customer traffic, the average transaction per customer, employment, inventories and a six-month-ahead sales outlook expectation. (The RSPI is based on a scale of 0% – 100% with 50% being normal).

According to the survey, retailers continue to show large degrees of optimism about the industry’s short-term future. The June Demand Outlook Index a six-month outlook for sales jumped to 59.4 percent from 47.1 percent in May.

“NRF has been expecting to see sales pick up by the third quarter and continue to gain strength throughout the rest of the year. This survey validates our projections,” said NRF President Tracy Mullin.

Although retailers continue to see higher levels of inventory, the retail employment picture in June has become more favorable.

“Slowly, but surely, it seems the retail sector is mending,” said Michael Niemira, Senior Retail Analyst, Bank of Tokyo-Mitsubishi, Ltd. “There appears to be a great deal of confidence by retail executives that conditions are improving.”

Also helping the economy has been the Federal Reserve’s lowering of interest rates another quarter percent and the recent strength of the stock market.

May retail sales, accordingly, jumped 5.1 percent from the same period last year, according to U.S. Commerce Department statistics.

“Consumer confidence has risen, low interest rates continue to boost housing, and Americans are looking forward to more disposable income as a result of the tax cut. May’s retail sales could signal the beginning of a solid economic recovery,” said NRF Chief Economist Rosalind Wells.”

Not surprisingly, all these positive signs are echoed by the Conference Board’s Expectation Index, which measures consumers’ feelings about the near economic future.

“Consumers have grown increasingly optimistic over the last three months. The recent turnaround in the stock market and an easing in unemployment claims may signal more favorable economic times ahead,” says Lynn Franco, Director of The Conference Board’s Consumer Research Center.

Consumers’ expectations for the next six months show continued improvement. Those anticipating an improvement in business conditions rose to 23.9 percent from 22.8 percent. Consumers anticipating conditions to worsen fell to 9.3 percent from 9.6 percent.

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