Retail News Blog

Consumer confidence is at a 40 year low of 37.7 in January of 2009 compared to 87.3 in January of 2007. A little background on consumer confidence: the index started in 1967 and was at 100 in 1985. What does this all mean for the retail industry? Consumer confidence is intrinsically tied to retail. It’s a bold statement, but it is a harsh reality that is facing many retailers in the United States. CoStar reports that 5,062 retail stores closed in 2008 across the United States, with another 621 already slated for closure in 2009, and its only January. Dark retail stores leave workers out of jobs; pushing unemployment higher, which leads consumers to cut back on their frivolous spending habits. They become frugal. As consumers reduce spending they transition to using existing items longer rather than buying new as they would have previously. For example: instead of buying new clothes at their favorite retailer, they instead wear items in their current wardrobe. These items have a finite usable life and will not last forever, eventually wearing out. The verdict – consumers cannot avoid spending for too long and will eventually be forced to shop.

We have been in a recession since December 2007, and as the recession cuts deeper into consumers’ wallets, they are looking to the new presidential administration for assistance. Many people believe the new administration will help buoy the market with new spending. President Obama’s $819 billion stimulus package passed the House of Representatives with little trouble considering it is filled with a Democrat majority. President Obama stands firm that his recovery plan will “create more than three million new jobs over the next few years.” 1.9 million jobs were eliminated in the past year, with 1.2 million of those loses occurring in the fourth quarter of 2008; the US is in need of job stimulation and growth. The decrease in consumer spending is deepening the recession and breeding high unemployment. Oregon has the 6th highest unemployment in the United States as of December and is headed higher. The national average is currently at 7.2% and Oregon is stretching almost two points higher at 9.0%. Some of our neighbors are experiencing slightly higher unemployment, with Nevada at 9.1% and California at 9.3%. Much of the presidential administration’s stimulus plan calls for significant infrastructure upgrades to roadways and bridges throughout the United State. However, 750 thousand of the recent job losses have been in office using industries: white collar jobs. What new jobs will this stimulus plan be creating for those consumers? Questions to be answered in the coming weeks as earnings reports are released, first quarter projections are made and more legislation is passed through the hands of our elected officials. Overall, one thing remains clear: as retail bankruptcies increase and unemployment soars, consumer confidence will continue to decline.