After a 1999 holiday season that left most retailers with visions of sugar plums, 2000 has left a bitter taste in the mouths of retailers across the country. A season that got off to a slow start—decreasing by .4 percent in November, according the U.S. Commerce Department—ended in the same spirit. Despite the usual last minute rush on the weekend leading up to Christmas, few retailers report exceeding, or even meeting, sales estimates for the season or the overall year.
At Zale, for example, same store sales fell 3 percent for November and December and earnings will follow suit. Zale blames the slow holiday season and weak consumer spending, despite its huge advertising expenditures.
Retailers who squeaked through the holidays are looking now toward a dismal start to 2001, according to most analysts.
The Livingston Survey of economists, for example, forecast gross domestic product growth will slow to a 3.1 annual pace next year from 5.1 in 2000. Inflation, meanwhile is expect to rise 2.8 percent in 2001 and the unemployment rate is expected to begin rising from its historic low of 4 percent in 2000, the survey said.
In light of the volatile stock market and everyone from Wall Street to Vice President-Elect Dick Cheney predicting gloomy days ahead, it is not surprising that consumer sentiment is plunging. Consumer sentiment is at its lowest in two years, dropping to 98.4 in December, versus 107.6 in November and hitting its lowest level since October, 1998. Even the Federal Reserve marks a potential economic downturn as the main threat to the U.S. economy right now.
Despite the economy’s current shakiness and undeniable recent decline, however, the dark clouds may be short-lived. A UCLA forecast, for example, predicts a recession that is short and shallow, leaving room for the economy to return to its robust state in 2002.
The average S&P 500 Index return estimate from Wall Street investment strategists also predicts a double-digit turnaround by the end of 2001. The world’s top investment strategists call for a 26 percent gain in the index to 1,600, from about 1,300 at the end of 2000, according to CBS.