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Retail sales expected to rise, national growth not reflected locally

Area merchants say national retail growth isn’t reflected locally.

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8:56 PM Sunday, January 22, 2012

By Eric Schwartzberg

Staff Writer

Despite the prolonged uncertainty over job growth and persistently high unemployment that cast a dark cloud over the nation’s economy, retail sales are expected to rise this year.

The 3.4 percent boost projected by the National Retail Federation for this year is slightly lower than last year’s pace of 4.7 percent growth, which netted $2.45 trillion. However, many economists estimate that real U.S. gross domestic product — the measure of all goods and services produced — will rise approximately 2.1 to 2.4 percent, nudging retail sales to $2.53 trillion in 2012.

In addition, the retail industry is expected to grow at a rate faster than many other industries.

Those are encouraging signs for an economy struggling to overcome a brutal and extended downturn, according to George Vredeveld, director of the Economics Center and professor of economics at Xavier University.

“For a health economy, consumers have to have their own financial situation in good shape and consumers have done a pretty good job of that,” Vredeveld said. “They may be ready to spend a little bit more and we certainly saw that at the end of 2011.”

Retail holiday sales for 2011 rose 4.1 percent over 2010, despite the stalled unemployment rate and lack of newly-created jobs, according to the NRF.

Vredeveld said he believes consumers will see signs that the economy will improve.

“It could be that employment picks up,” he said.

“This, of course, is the most important thing, because it drives income and that’s what drives spending.

“Increased spending would be very good for this region, but what you want to see is an increase in spending that’s based on good, sound financial decisions. I don’t think it would be good if we saw increased spending based on increasing household debt.”

The projected 3.4 percent increase would outpace the 10-year annual average increase of about 3.1 percent and mark consumer spending’s third consecutive year of recovery.

Jennie Robe said news of the retail rebound was encouraging, but she hadn’t seen much upswing at her Middletown business, Patti’s Cards and Gifts, which has been in business for nearly 25 years.

“We did not see an increase of that much,” Robe said. “Sales have been pretty much running the same as the previous year for several years now.”

The fact that the forecast says retail growth will outpace other industries also is encouraging, she said.

“I think sometimes Middletown is behind the curve as far as the numbers go,” Robe said. “I think things sometimes start on the West Coast and head our direction. I hope that it’s a trend that follows us.”

Penny Reiff, who owns Penny’s New & Used Furniture, a 15-year-old Hamilton business, said projections of nationwide retail growth aren’t encouraging.

“We haven’t seen any growth on my level,” she said. “It’s been flat.”

However, even with sales being flat, Reiff said she is happy.

“At least you don’t have to cut costs and expenditures,” she said. “There’s no more vacations or stuff like that, it’s just survival now, paying your rent, paying your bills, your employees, whoever. If you do get a little profit, that’s great, just don’t go backwards.”

Any slowness is the economic recovery of the Greater Cincinnati area, which includes Butler County, can be attributed to the region’s stability compared to other areas, Vredeveld said.

“We’ve seen over a long period of time that this is a fairly diverse economy and consequently we don’t see some of the sharp downturns or the sharp upturns,” he said.

Micah Day of Middletown said he and his family plan to reduce their retail spending this year.

“We are now shopping at Goodwill and save a lot, due to the increase in gas, food and health insurance copays, as well as stagnant wages,” Day said. “We have also pared down to one car, rather than two, and plan to pay cash for everything.”

Retail contributes $2.5 trillion annual to GDP and is regarded as a daily gauge for the nation’s economy.

The retail sales forecast, which excludes sales of autos, gas and restaurants, was shaped by a variety of economic headwinds. Consumer confidence, while rising, is still below what would be considered healthy. The unemployment rate reached its lowest level in nearly three years in December. But it’s at a high 8.5 percent. And those that have held on to jobs are seeing paltry wage gains that are not keeping up with the rising costs of everything from food to clothing. The value of the U.S. home has yet to recover, with foreclosed properties dragging down prices everywhere.

“Our 2012 forecast is a vote of confidence in the retail industry and our ability to succeed even in a challenging economy,” said Matthew Shay, NRF’s president and CEO. “Retailers have played a key role in driving growth, but to continue this momentum we need Washington to act on proposals that will spur job creation and unleash the power of the private sector.”

The Associated Press contributed to this report.

Retail continued on A4

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