you thought of buying a new outfit, adding a little
spark to your home, or treating yourself in some way?
so, store managers are hoping you don’t chicken out on
that purchase. The stock market plunge this year is
keeping them awake at night. They are afraid it will
spook you and keep you out of stores just when they need
you the most.
a demoralizing holiday shopping season, with even giants
like Macy’s, Nordstrom and Best Buy threatened by
online competitors, many retail operators are worried
about stores being snubbed. Some, like Kmart, are
closing stores and fighting to keep from becoming
dinosaurs. The last thing any traditional retailer needs
now is a stock market plunge conjuring up visions of a
recession, causing nervous consumers to stay away from
malls and stores.
are on the front line," and when people worry about
a possible recession or losing money on their
investments, it reduces their willingness to spend, said
National Retail Federation economist Jack Kleinhenz.
major discussion focus has been on: Is the economy
failing?" he said during a presentation at the
recent NRF annual conference in New York, a gathering of
34,000 retail-related businesspeople. "When there
is increased uncertainty, it does impact
retailers," he said.
gnawing feeling that retirement savings might get wiped
out by a nasty stock market, or that plunging stock
prices might be an early warning sign that layoffs are
coming, has implications for the full economy, not just
the retail sector.
the last year, purchases Americans have been making have
been a key driver of the U.S. economy. While the
industrial economy has gone into a recession, the
consumer sector of the economy — which involves buying
everything from restaurant meals to furniture, doctor
payments and hotel stays — has been relatively strong.
It’s made up for factories laying off people and
struggling to sell into a weakening global economy. As
China, in particular, has slowed and pulled back from
constructing buildings, highways and modern
infrastructure, the world has missed the mammoth economy’s
appetite for equipment like bulldozers and building
materials like cement and copper.
this environment, "the American consumer is
definitely a player — a driver of the economy,"
fact, economists aren’t only counting on American
shoppers to keep the U.S. economy alive, they are
counting on them to keep the globe out of recession.
Analyst Thomas Lee, of Fundstrat Global Advisors, has
noted the U.S. consumer economy makes up 15 percent of
global gross domestic product. He contrasts that
economic power with mighty China, where the entire
Chinese economy makes up 13 percent. In the U.S., the
consumer is responsible for 70 percent of the economy,
far surpassing the meager 10 percent from the industrial
last year, however, signals from consumers started to
put retailers and economists on edge.
the crucial holiday shopping season and the last quarter
of 2015, "the consumer took a hiatus" from
spending, said Shawn DuBravac, chief economist for the
Consumer Technology Association. That has raised
questions about whether something in the economy is
holding consumers back and will continue to do so in
2016, he said.
the stock market peak last June, concerns about a U.S.
recession have been building, and people have lost $3.4
trillion in the U.S. stock market, measured by the
Wilshire 5000 index of large and small companies. This
month alone, they’ve lost about $1.8 trillion.
the stock market stops its unnerving plunge and
companies don’t get jittery and start laying people
off, most economists think the economy will continue to
benefit from American consumer purchases. Morgan Stanley
Research Executive Director Paula Campbell Roberts notes
Americans are in the strongest position they’ve been
in since 2006 because they’ve regained jobs, paid off
debt, and recovered wealth in retirement savings and
U.S. consumers remain somewhat vulnerable, she said, and
that makes retailers vulnerable too.
still face the residual effects of losing jobs, she
said, noting that unemployment among middle-income
people was far higher than the 10 percent peak in the
economy during the 2008 recession. She adds that wage
growth continues to be sluggish at the same time as high
rents "are a huge issue" amid stagnant wages.
Further, employers have shifted higher health care costs
to employees, reducing consumers’ ability to spend,
have had employment-driven growth" because more
people have paychecks now that the unemployment rate has
come down, she said, but "that’s not the same as
wage growth, so the person may not feel compelled to
Roberts does not expect consumer demand to go into a
slump, but with the U.S. held back by a global slowdown,
she thinks consumer spending in 2016 will slow to 2.3
percent versus 3.1 percent last year. She estimates only
a 20 percent chance of recession.
consumer is the key catalyst in the economy," said
DuBravac. "If consumers slow down, the rest of the
economy moves in lockstep."
retailers find themselves in "a very competitive
environment," DuBravac said. To draw customers,
they’ve been forced to slash prices, and that has
the holidays, he said, prices on TVs declined 8 percent.
In such a competitive environment, "there is a risk
for retailers. Any misstep could be detrimental,"
and a shock from the stock market would be too, he said.
without a downturn in the stock market or economy,
analysts are predicting store closings and shopping
centers pressured by vacancies.
is never going away," said Kleinhenz. "But
there will be destruction. There will be