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Forecasters see historic drop in retail sales

The nation’s retailers had a rough 2008, but this year will likely be even scarier, according to a sales forecast released Tuesday from the world’s largest retail trade organization.
/ Source: The Associated Press

The nation’s retailers had a rough 2008, but this year will likely be even scarier, according to a sales forecast released Tuesday from the world’s largest retail trade organization.

Retailers are expected to record a 0.5 percent drop in revenue in 2009, the first annual decline in three decades and perhaps much longer, according to a National Retail Federation forecast released Tuesday.

That’s well below the modest 1.4 percent gain they recorded for 2008.

Massive layoffs, slumping home prices and tight credit are keeping shoppers tightfisted.

The NRF estimated that retail sales for the first half of 2009 will fall 2.5 percent. Then, they’ll show a 1.1 percent decline in the third quarter and rebound to a 3.6 percent increase in the fourth quarter, aided by an anticipated government economic stimulus.

Another factor that should help sales figures for late 2009 is that sales were so dismal in the fourth quarter of 2008 — declining 1.7 percent, according to Rosalind Wells, NRF’s chief economist.

For November and December combined, sales fell 2.8 percent, well below the association’s forecast of a 2.2 percent gain.

“Most of the consumer behavior we saw in 2008 will continue well into this year,” said Wells

She said she’s never seen an annual decline in the 30-plus years she has tracked retail sales. She started with NRF in 1995 but had previously worked as J.C. Penney’s chief economist from 1978 to 1988.

NRF’s retail sales figures exclude business from automobile sales, gas stations and restaurants.

One of the key challenges for the retail industry is the massive layoffs across all sectors that appear to be accelerating, Wells said.

“Employment is one of the foremost criteria we look for, which in turns means income,” Wells said. “Without a good employment trend, it is very hard to have confident shoppers to go out and spend. Right now, employment numbers have been terrible, and more layoffs are to come.”

Several big names in corporate America announced layoffs Monday.

Pharmaceutical giant Pfizer Inc., which is buying rival drug maker Wyeth in a $68 billion deal, and Sprint Nextel Corp., the country’s third-largest wireless provider, each plan to slash 8,000 jobs. Home Depot Inc., the biggest home improvement retailer in the U.S., is shedding 7,000 jobs, and General Motors Corp. said it will cut 2,000 jobs at plants in Michigan and Ohio due to weak sales.

Caterpillar Inc., the world’s largest maker of mining and construction equipment, announced 5,000 new layoffs on top of several earlier actions.

Wells said she felt somewhat encouraged by data released Monday by the National Association of Realtors showing an unexpected increase in sales of existing homes helped by booming sales of bargain-basement foreclosures in California and Florida. But she said housing must improve substantially before the economy can start to pick up.

The NRF predictions are being released on the same day the New York-based private research group The Conference Board is slated to announce its January index on consumer sentiment, which economists expect will remain near all-time lows.

The reading is expected to be up slightly, at 39, from 38 in December, which marked the lowest point since at least 1967, when the index began.

In January a year ago, consumer confidence was at 87.3.

The index is compiled from a survey of 5,000 U.S. households and will be released at 10 a.m. EST.