The market-research firm Retail Forward Inc. (Columbus, Ohio) has lowered its fourth-quarter retail sales growth forecast (excluding car and gasoline sales) to 1.5 percent from its earlier estimate of 2.5 percent. This, following the recent downgraded prediction of the National Retail Federation for a 2.2 increase in sales over the last three months of the year, forebodes the worst Christmas selling season in a decade.
During the recession of 1991, fourth quarter sales rose 1.8 percent from the previous year.
“It's hardly a surprise that forecasts were revised down after the terrorist assaults on the World Trade Center and the Pentagon,” noted Frank Badillo, Retail Forward senior retail economist. “Economists fear consumer spending, which had already softened before September 11 in response to rising unemployment and declining stock prices, will sharply drop in the wake of the attacks because of additional layoffs and eroding confidence in the economy.
“There is also the added unknown of the attacks'psychological toll on consumers,” he added. “Many people are having trouble focusing on work. Putting together a Christmas shopping list may be the last thing on their minds.”
Retailers were already bracing for a tough season, noted the research firm. The economy, even before the attacks, was teetering on the edge of recession. The unemployment rate jumped to 4.9 percent in August, from 4.5 percent in June. Deteriorating labor markets combined with falling stock prices have hurt consumers'faith in economy. The September consumer confidence index suffered its biggest drop in more than a decade.
Given the precarious condition of the economy, retailers feared getting stuck with too much merchandise even before the attacks. Eddie Bauer (San Francisco), a division of Spiegel Inc., reported that it trimmed holiday inventories by 10 percent from the year before, despite introducing new apparel that it felt would appeal more to its Baby Boomer clientele.