Reading the Signs,
Discerning the Times
Faced with conflicting economic signs and threatening headlines,
should the retail environments industry prepare for storms or
clearer skies? By Dr. Jeff Dietrich
During a recent vacation at our lake house, my family watched as omi- nous clouds gathered to the north and west. The wind picked up.
Storms were reported to be heading in our
direction. We brought everyone inside, cov-
ered the boat, secured the toys, and waited.
Nada. Forty minutes later we were in the lake
under clear skies. Two nights later, the same
threatening signs appeared. We joked that it
was another false alarm. Then, 15 minutes
later we witnessed a terrifying sound-and-
light show with horrifying intensity. With
wind gusts that reached 70 to 80 miles per
hour, ripping everything off our deck, the
storm dumped over two inches of rain in 25
minutes. A microburst not 300 yards away
tore the tops off of 25 trees and crushed nine
cars. Who knew? Certainly not the weather-
man, who got it wrong both times.
IS AN ECONOMIC STORM COMING?
Reading the signs in the economy is
every bit as challenging as predicting the
weather. Headlines often seem threatening. Consider some recent economic news
that might raise the level of anxiety. Should
we be preparing for a downpour or worse?
Annual Year-Over-Year Rate of Growth
Health and Personal Care Stores
General Merchandise Stores
Sporting Goods Stores
Beer, Wine and Alcoholic Beverage Stores
Automotive Parts Stores
Computer and Software Stores
Bldg Materials, Garden, Supplies Stores
Miscellaneous Stores (including O;ce Supply)
4. 8 %
4. 9 %
3. 2 %
3. 4 %
5. 4 %
5. 5 %
5. 9 %
6. 4 %
7. 6 %
7. 9 %
Annual Retail Sales (excluding automobiles, inflation adjusted) rose 2. 4 percent for the
12 months ending in June, with growth evident in most sectors.
The Federal Reserve Board reported that
median family net worth adjusted for inflation fell to $77,300 in 2010 from $126,400
three years earlier, a loss of 38. 8 percent
and the lowest since the early 1990s. Most
of the decline centered on the collapse in
home values (nearly 30 percent), a stock
market that fell nearly 50 percent, and
underemployment of 15 percent. A full
recovery for the average household net
worth will take years.
The Congressional Budget Office,
Dr. Bernanke, and a gaggle of other pundits have pounced on the term “fiscal cliff”
to describe where the U.S. economy is
heading on January 2, 2013, assuming our
leadership in Washington remains intransigent through November. Set to arrive
in 2013 are roughly $700 billion in various tax increases, across-the-board reductions in government expenditures ($98
billion) due to sequestration, and another
increase in the debt ceiling (pick a number).
These issues, combined with the European economies sliding into recession and
China’s economy slumping, and U.S. citizens and business leaders carry a bundle
of uncertainty left from the remains of the
Great Recession. The market is skittish.
Key leading indicators reflect an economy
that is growing, but at a mild pace. The
U.S. Leading Indicator, the Purchasing
Managers Index, the Chicago Fed National
Activity Index and our own ITR Leading
Indicator indicate that growth in the general economy slowed in the second quarter.
Wind picking up.