Wallets predicted to snap shut in '07 - Fear of an economic slowdown will hit retail sales, a trade group says
NEW YORK -- Those countless for-sale signs that have been
sitting in front yards across Central Florida might as well
be big red flags for retailers who think shoppers will be
splurging this year.
Consumers, tapped out of their home-equity loans and wary
that the cooling housing market may lead to an economic
slowdown or worse, are expected to be more tightfisted with
their wallets during the next 12 months, according to a
retail-sales forecast released Tuesday by the National Retail
Federation during its annual convention in New York City.
The retail-trade group predicts store sales nationally
will see a 4.8 percent increase in 2007, the slowest year-over-year
gain in five years and down from a robust 6.3 percent jump
in 2006. Those sales figures exclude automobiles, gas stations
and restaurants.
"It seems to us that the economy is headed for a soft
landing," said Rosalind Wells, chief economist for
the retail federation. "Slow growth, but no recession."
Economists keep close tabs on consumer spending because
it makes up about two-thirds of U.S. gross domestic product
and is a key indicator of economic health.
In Florida, overall store sales are also expected to moderate,
said Rick McAllister, president of the Florida Retail Federation.
"The housing situation is a concern," he said.
However, McAllister added that Florida's relatively strong
economy and population growth should help retailers across
the state outperform the rest of the country.
"Typically, we just do a tad bit better than the nation,"
he said, noting that pharmacies that cater to the state's
growing baby-boomer population and resurgent department
stores stand to improve on recent sales gains.
The national federation's Wells said consumers started
to curb their spending in the second half of last year,
weighed down by high gas prices, lackluster job growth and
a weaker housing picture.
She said consumer spending should continue to slow for
the first half of this year, with spending picking up toward
the end of 2007.
However, the sales pickup likely would be contingent on
the housing market's stabilizing, a drop in crude oil and
fuel costs, or lower interest rates.
"There are a lot of ifs," she said.
In the meantime, retailers who sell home furnishings, building
supplies and other home goods may be hit particularly hard
by the residential-real-estate slump. McAllister said those
stores will likely struggle in Florida, where the housing
market has dipped.
In Central Florida, for instance, new-home and existing-home
sales have slowed. Last year alone in the Orlando core market,
existing-home sales were down more than 12 percent compared
with 2005, though that still was the second-best year on
record.
The National Retail Federation said sales at building-material
and garden stores slipped by the end of last year. Furniture
retailers also saw their sales sag from an 8 percent sales
gain in the first quarter of 2006 to a 2.5 increase by year's
end.
Further, Wells said the slump in housing-related retail
sales dragged down overall holiday retail sales, which came
in at 4.4 percent above the 2006 holiday season but below
the 5 percent gain originally predicted by the trade group.
The retail federation says it expects online spending to
continue to achieve double-digit gains, and luxury retailers,
who stand to benefit from those recently enriched by stock-market
gains, to do well.
2%
economic growth seen in '07