Retail Expected to Slow Down

    January 17, 2005

The National Retail Federation expects consumer spending to rise 3.7% in the first quarter.

Moderate growth will come as a result of high energy costs, and poor job growth according to a study released Monday.

“The consumer has been remarkable in shouldering this economic expansion, but now something has got to give,” said Rosalind Wells, the Retail Federation’s chief economist. This year’s projection pales in comparison with last year’s 9.9 percent leap in sales in the first quarter — and that’s part of the problem, Wells conceded. However, she’s worried that sluggish job and wage growth will keep dogging retailers, especially discounters.

“The labor market will continue to expand this year, though our concern is that modest employment growth will lead to modest income growth, which will put a financial strain on consumers,” she said.

According to a CBS MarketWatch article,

“Still expected to score big at the cash registers are luxury retailers, who keep ringing up sales as the divide between the wealthy and the poor grows. Pricey retailers also are reaping some of the only benefits of a weak dollar: hot demand for luxury products by international tourists.

Another factor looming as a pocketbook pincher is a softening in the housing industry, which will affect wages as well as sales of furniture, home furnishings and home improvement products. Richard Hastings, Variant Research Corp.’s retail economist, said a slowdown in new construction could have a sweeping effect on consumer spending.”

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