Stores expecting rebound Early data give them good reason RETAIL

December 13, 1992|By Michael Dresser | Michael Dresser,Staff Writer

Think of the consumer economy as a pro wrestling match - only less genteel.

The good guy -- let's call him Captain Economy -- has been down and dazed for a long time. Twice, he's tried to pick himself off the mat, but the evil Recessionator stomped him flat.

Now Captain Economy has struggled to his knees. Full of pent-up fury, he looks ready to charge. But here comes the Recessionator again, aiming another dirty blow at our hero before he's regained his balance.

That's about where the consumer economy stands these days.

Retailers expect a strong comeback this holiday season, and early sales data support those predictions. TeleCheck Services, which provides check acceptance and guarantee services, reported a 4.2 percent nationwide gain in purchases by check during November and projects a 6 percent gain for the season.

Even purveyors of luxury goods say sales are reviving. Carl Fisher, president of Kent-Fisher Furs in Baltimore and Towson, is ringing up sales and "knocking on wood."

"For the first time in three years, we are really on a roll," he said.

Consumers are simply "tired of feeling bad," said Charles McMillion, president of the Washington-based business information firm MBG. "Everybody in every income class has been so depressed so long that everyone is feeling like treating themselves well this year."

But what about after the holidays, when the bills start pouring in? Can the U.S. consumer economy lead the world out of recession?

That could be a problem, Mr. McMillion says.

"This jump in retail sales is primarily coming out of savings," he said. The national savings rate dipped to 4.5 percent during the third quarter -- down from historical levels of 7 percent to 9 percent -- and that rate is likely to fall even more this quarter, he notes.

"Soon after Christmas, when the bills start coming due, people will have to cut back," Mr. McMillion said.

Kurt Barnard takes a view that is even more bleak. The publisher of Barnard's Retail Marketing Report sees the holiday bounce as a post-election "blip," rather than a signal that the economy is improving.

The real problem: "Jobs, jobs, jobs. That's the only thing, and nothing is more important than that."

Dismissing the recent drop in unemployment rates as insignificant, Mr. Barnard asserted that the United States has suffered "structural destruction of over a million jobs" for which workers won't be recalled. "You can't pay your bills with confidence and hope."

But William F. Ford, immediate past president of the Federal Reserve Bank in Atlanta, says the nation has been out of an "overpublicized" recession since well before the election. Prospects for the coming year are good, he adds.

Mr. Ford, now a senior economic adviser to TeleCheck, says that if housing starts can climb a little from the October rate of 1.23 million units, winter and spring retail sales will get a boost from consumers furnishing their homes. And with a high number of JTC older cars on American roads, the economy could be driven forward by consumers heading to dealers' showrooms, he adds.

Joel Evans, co-director of the Retail Management Institute at Hofstra University in New York, agrees that the rebound can be sustained after the holidays, largely because many retail chains are expanding aggressively.

Those expansion plans boost the economy long before the first sale is made, Mr. Evans says. Building or remodeling stores adds jobs for engineers, architects, construction crews and even the fast-food restaurant workers who feed them.

But Baltimore's economy might recover more slowly than the nation's. TeleCheck's survey found that local purchases rose only 0.1 percent during November, and early December sales rose only 1.2 percent, half the national average. Meanwhile, the region faces job cutbacks among defense contractors.

"Maryland lags far behind the nation in coming out of this recession," Mr. McMillion said, citing slow job creation and lagging income growth.

Once the consumer economy emerges from the winter months, when sales are normally slow, it faces a hurdle of undetermined height. Millions of Americans will be getting smaller income tax -- refunds -- or will have to pay more -- because the Bush administration cut back tax withholding rates last year in a bid to spark the economy.

Gene Nazelrod, a Towson certified public accountant, estimates the difference for the majority who did not readjust their withholding at $100 to $200. "A lot of people look at that as splurge money."

Will the loss of that money create a serious drag on spring sales, just as the economy begins to develop some strength?

Mr. Barnard doubts it will have a major impact, but others are more nervous. Said Mr. Ford, "I haven't tried to quantify the effect, but it's not trivial."

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