Every Year at This Point, just at the turning of July to August, I experience a moment of complete calm. It’s a perfectly balanced time when everything moves slowly and life becomes simple. The days aren’t noticeably shorter yet, and if anything, the sun seems a little hotter. Here in Chicago, there’s nothing to do but laze by the lakefront, wait for the Paw Paw peaches to hit farm stands, and watch the Cubs brush greatness before nosing down, gently and inevitably, into the NL cellar.
So pity the poor retailers: no midsummer peace for them. They have to lean forward at this time of year and track back-to-school sales for clues about how consumers will spend during the all-important holidays. That’s a magic trick every year, in my opinion. This year, it will be a feat of clairvoyance.
On the macro level, we’ve avoided a broad economic disaster — something that seemed imminent last October. But all the expert discussion now is about the shape of the recovery. Is it a V, with a sharp drop and sharp rise, or a long, drawn-out U, where we languish at the bottom of a trough for a year or so before coming back to health?
Then there are those lagging indicators, notably unemployment. U.S. joblessness is at 9.5%, its highest point since 1983. And all the expert reassurance that jobs always trail behind other recovery signposts won’t matter. People who are out of work can’t spend, and people who are afraid of losing their jobs won’t spend.
Don’t forget the New Frugality. U.S. household debt hit 100% of gross domestic product by the end of last year, at which point we owed as much wealth as we were creating. Just getting back to where we were in 2001 will mean paying off $3.5 trillion in debt. That kind of paydown will require time and conscious effort and won’t happen by the end of this year.
All this suggests that back-to-school shopping may be a much less reliable indicator than ever of holiday spending levels. Early polls by the National Retail Federation and BIGresearch suggest that the average family with kids K-12 plans to spend 7.7% less on school purchases this year.
Shoppers may stretch their wallets a bit to outfit the kids for school; that can seem like an investment. But overspending simply to fill stockings at Christmas could look like the kind of indulgence that got us into this mess.
From this vantage point, it looks like the retail holidays will be about lean inventories, deep discounts, value marketing done on the fly, and lots of tough selling.
Now pass me the sports pages and a peach.
Network
