Economic woes affect entire nation, but play out differently from place to place
WASHINGTON -- To say that all retailers have experienced the economic downturn in the same way would be ignoring reality. Clearly the increasing slowdown of the economy has played out differently across the nation, with sectors of industry, finance, government, service and agriculture taking hits of varying severity.
In its "Beige Book" report updated this past fall, the Federal Reserve Board noted how at a national level, agriculture appears to have weathered well thus far, with real estate and construction taking hits in many metro areas.
Here's a regional breakdown:[image-nocss]
Retail prices, despite falling from historic highs, have remained at elevated levels, with sales reportedly sluggish despite the back-to-school bump. Export demand propelled the agriculture sector; while real estate and construction continued its downward momentum. Lending and credit activity had "weakened considerably." And yet, retailers like Fred Faulkner, sales and marketing manager for Fastrip Food Stores, Bakersfield, Calif., said they remain optimistic going into the future. Despite problems along the Arizona border, where fuel is cheaper in Mexico, he said, "People are still going to fill their tanks."
Real estate and construction continues to be sluggish, with Chicago reporting project postponements. But at the same time, first-time home buyers were taking advantage of tax credits. Prices for raw goods remained high, with concerns over frost and the bounty of the fall harvest looming. Cleveland reported factory shipments and steel output as soft, with the bright spot being energy involving in the coal and natural gas sectors. Consumer spending in the Minneapolis district was down slightly but tourism numbers had ticked upward. David Carpenter, president of ShortStop Stores Inc., Des Moines, Iowa, had a "relatively confident" view of the future, counting on falling gas prices to put more money into people's hands.
Despite the hurricanes of late summer, energy prices had eased in early fall, helping with transportation costs in many industries. Energy production in general has been the area's bright spot. But the pessimistic view of the economy and other financial concerns put a damper on consumer spending. Auto sales fell, even in the used-car market, while credit problems stifled real estate and construction sectors. And while Tabor Brooks, vice president of Texas Star Investments Inc., Corpus Christi, Texas, had a "good year" in 2008, he is cautious, noticing smaller transactions and consumers "not having much cash on hand.bCrLf
Reports from Boston say the airline, pharmaceutical, telecommunications, retail and construction industries have slowed significantly. However, demand for consulting services from the healthcare sector continues to be strong, notwithstanding overall economic conditions. Capital spending in the retail sector is "mixed," with some reporting postponements, but others proceeding as planned. A "soft hiring freeze" was also noted. Residential and commercial real estate and construction has slowed, according to the Philadelphia region, with the outlook "pessimistic." Still, Jay Dempsey, director of marketing for the 33-store chain, Heritage's Dairy Stores Inc., Thorofare, N.J., says customer loyalty to their no-gas, quality foodservice offer has kept volatility at bay.
Credit conditions have tightened, with commercial contractors noting a growing number of cancelled projects. The Atlanta district reported that tropical conditions actually improved area harvests, but Gulf hurricanes did lead to shortages at the gas pump. By most accounts, cost pressures on businesses "eased" in early fall. Retail sales in big-ticket items like furniture and automobiles were slow, while tourism remained "mixed," buoyed by an influx of international visitors. Robert Lamb, a single-store owner from New Bern, N.C., says the agriculture business had continued to do well, but customers employed in construction took a big hit.
[For more information on how retailers view the coming year, look for the annual Outlook Survey article in the December 2008 issue of CSP magazine.]