Shoppers Curtail Buying; Christmas Sales May Fizzle : Retailing: Gas is higher, and consumers are worried. Analysts fear an off year.
In the latest sign of a weak U.S. economy, shoppers are cutting back purchases at department stores, some of the nation’s best-known retailers reported Thursday. The trend provides further evidence that this year’s Christmas shopping season could be a dud.
“This will probably be the worst Christmas for retailers since 1982,” said Bruce Steinberg, an economist with the Merrill Lynch investment firm in New York.
On Thursday, such retail firms as Sears Roebuck, J. C. Penney, Limited Inc. and Carter Hawley Hale, owner of the Broadway, reported sales declines from last October in stores that had been open at least a year.
Separately, consumer credit rose at a modest 4.9% annual rate in September, the Federal Reserve Board announced. The $3-billion increase appeared to reflect the higher cost of gasoline as well as decisions by hard-pressed Americans to pay off their debts more slowly, analysts said.
Although the overall sales picture was marginally better than last year by some estimates, few analysts found much to cheer about. “The theme here is that consumers are being very cautious and their rate of spending is slowing down,” Steinberg said.
The consumer slowdown comes amid growing anxiety about the economy, as labor markets weaken and Mideast uncertainty persists. Gauges of consumer confidence have fallen to their lowest levels since the early 1980s, the time of the last official recession.
The news from major retailers “says to me very clearly that indeed we are in a recession, and it’s most directly being caused by consumers,” said Cynthia Latta, a financial economist with DRI/McGraw Hill in Lexington, Mass.
Consumer spending is closely watched because it amounts to two-thirds of U.S. economic activity. Thursday’s report is limited to activity at major retail stores. Next week, the government will release a broader measure of consumer purchases, which also includes autos, gasoline and many other items.
The news of weak retail sales follows a recent stream of negative data on employment, income and other important features of the U.S. economy.
“Every factor that has influence on consumer spending is negative,” said Sandra Shaber, an economist with the Futures Group, a private economic research firm in Washington. “We’re talking about the job market. We’re talking about income gains, inflation and home prices. It’s difficult to see how there could be any more strength in consumer spending than there is.”
The gloomy picture has led to predictions that the coming Christmas shopping season will be disappointing for retailers, many of whom rely on the holidays for up to half their annual sales. Faced with paltry consumer demand, stores tend to slash prices--and profits--to keep inventories from piling up.
Christmas could turn out “pitiful” for stores, said James E. Newton, president of Economic Perspectives, a retail consulting firm in Delaware, Ohio. “Retailers are not going to enjoy it at all.”
A separate key to consumer behavior is the amount of credit sought by the public. In September it rose at a 4.9% annual rate. While hardly minuscule, the level suggests a retrenchment in spending and is somewhat smaller than the credit increases of past months, analysts said.
Revolving credit, for example--reflecting credit-card use--grew in September by $1.9 billion, smaller than August’s $2.35-billion increase.
“Consumers are trying to buy a little time and maintain their living standards by not paying off their credit so rapidly,” said DRI’s Latta. Also, people in September may have put more costly gasoline purchases on their Master Cards and Visas, pushing up the credit figures, she said.
October sales reports of selected retailers, compared with a year ago:
* Sears Roebuck same-store sales down 0.4%; overall sales down 1.2%.
* J. C. Penney same-store sales down 6.3%; overall sales down 4.9%.
* Carter Hawley Hale same-store sales down 0.1%; overall sales up 1.7%.
* May Department Stores Co. (May and Robinson’s stores in Southern California, Lord & Taylor, Hecht’s, Filene’s and Foley’s) same-store sales down 4.4%; overall sales up 1.1%.
* Limited Inc. same-store sales down 1%; overall up 13%.
* Kmart Corp. same-store sales up 1.3%; overall sales up 11.2%.
* Wal-Mart, same-store sales up 10%; overall sales up 25%
CONSUMER CREDIT
Sept., ‘90: $735.4 Aug., ‘90: $732.4 Sept., ‘89: $705.7
