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Home » Retailers, economist like outlook for 2013
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Retailers, economist like outlook for 2013

February 27, 2013
DC Velocity Staff
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Both attendees and speakers at this year's annual Retail Supply Chain Conference, presented by Retail Industry Leaders Association (RILA), say they expect that 2013 will be "the year" American business, and especially consumers, start to feel tangible evidence that the economy has good growth in store in the months ahead.

During a "State of Retail" session presented by analyst Dana Telsey of Telsey Advisory Group, a real-time poll of the roughly 1,000 retail supply chain executives in the audience revealed more than half (52 percent) have an optimistic view of the U.S. economy and their business in 2013. Twenty-eight percent said they were unsure of the course of the economy, and 20 percent said they remain pessimistic.

Telsey, and other presenters during the conference's opening day, noted there remains a mixed bag of economic indicators but that, on the whole, signs and historical patterns point to a rosy year. "We started 2013 with both headwinds and tailwinds for the economy ahead," said Telsey. She projects a solid and tangible improvement in both the housing markets and wage growth this year, both of which she predicted will result in more dollars available to consumers.

She did caution, however, that the "headwind" that could inhibit improvement is a big one. The increase in payroll tax at the start of 2013 surprised many Americans who didn't see the increase coming based on the political rhetoric of the 2012 campaign year, including the assumption that taxes would increase only for Americans in the 98th or 99th percentile of income earners. "That payroll tax increase is taking $100 billion of potential spending out of consumers pockets," she said. Still, Telsey sees unemployment staying flat and possibly drifting slightly down, continued stock market growth, and annual U.S. gross domestic product (GDP) growth of roughly 6 percent on an annualized basis.

That positive sentiment was echoed by Marci Rossell, former chief economist at CNBC. "This is the year people, as individuals, will start to feel the effects of an improving economy," Rossell said. "The average American consumer will start to sense an improvement in an economy that has actually been improving for two years."

She attributed the disconnect between economic data that shows the recession ending two years ago and the sentiment of most Americans that it hasn't yet ended to the characteristics of the, thus far, jobless economic recovery.

The recovery began in 2010, but it was not a traditional recovery in that it was not driven by housing, but instead by growth in exports. "Typically, the recovery is driven by housing, but you can't have a recovery driven by housing when housing caused the problem in the first place," she said. "This recovery has been driven by exports."

Rossell said that many people (including business people) think of China as a potential market when discussing export growth. She cautioned, however, that while China's overall export growth has been impressive, its per capita wealth remains relatively low. "Their GDP per person, which is how you measure how wealthy they are, is only about 60 percent of Mexico's," she said.

Even with that somewhat surprising statistic in mind, Rossell said the improvement of the U.S. economy has much to do with income growth among the Chinese. "There are a lot of people that live there," she said. "And when they get rich, what do they want? They want our stuff. Our economy is being driven by the wealth of the rest of the world. That's a very different recovery than we have ever seen."

While income, or "wealth," has been growing in other parts of the world, Americans responded to the economic downturn by cutting their spending. "When Americans cut their spending, they cut labor-intensive services," Rossell pointed out. Americans cut everything from eating out to pedicures from their personal budgets. "In an effort to fix their personal balance sheet, they cut," she said. "What did they cut? They can cook their own dinners. They can wash their own cars, they can do their own laundry. They cut labor-intensive services. That's why the export-driven recovery has not created jobs."

The dynamic of the recovery, though, will begin to shift this year. "This will be the year American consumers start to feel like they are in a recovery," she declared. Based on projections for key stock market indexes, all of which are hovering near all-time highs, Rossell anticipates the news will be improving even more for corporate America and that will help boost consumer sentiment and outlook. "If you have continued to invest in things like 401Ks, if you have been doing the right things, your portfolio looks better than it did before the downturn," she said. "The recovery in the stock market is what will help people feel the recovery that they have not yet sensed."

Supply Chain Services Business Management & Finance
KEYWORDS Retail Industry Leaders Association
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