Retail Top 100 2012, No. 4: The economy/unemployment

Feb. 12, 2013

The numbers say the Great Recession ended way back in June 2009. Somebody needs to tell the economy that. Growth isn’t accelerating as it normally would during a recovery. The U.S. economy in 2012 is expected to grow a scant 2 percent (unchanged from 2011). While 2 percent may keep us from dipping back into recession, it won’t make much of a dent in unemployment. It follows, of course, that with more people out of work, fewer people will be buying, and thus the retail sector will decline.

Consumer spending, which accounts for about 70 percent of GDP, has been positive but shows no signs of driving a sustainable recovery. The economy will remain vulnerable to possible shocks, such as war, terrorism, oil price hikes, or natural disaster. Any one of these could tip the U.S. into recession.Retail sales are expected to grow about 10 percent in 2012, a slightly optimistic uptick from the 8 percent expected in 2011. One unpredictable factor that might lower 2012 sales is the sovereign debt crisis in Europe, which could keep markets volatile and consumers concerned about the future. Still, a reliable disconnect between consumer confidence and actual spending bodes well for retailers. Sales began to climb in October 2011, due in large part to a 3.7 percent jump in electronics sales (the largest monthly increase in two years) even as confidence fell to its lowest level since 2009.

If the euro crisis spins out of control, fear of a new credit crunch may deter spending by business owners. Another factor that could lower next year’s forecast is slower-than-expected growth of personal income, which hasn’t been keeping up with the rise in retail sales. If lower wages and high unemployment persist during the second half of the year, expect retail sales growth to slow even further.

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Topics: Top 100 Retail

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