Consumers gained back a bit of their confidence this month, sending retail stocks 1.8 percent higher Tuesday, but economists warned that they’ll have to regain more of their spending power before the economy can fully recover.
This story first appeared in the August 26, 2009 issue of WWD. Subscribe Today.
The Conference Board’s Consumer Confidence Index, based on a survey of 5,000 U.S. households, bounced back in August, rising to 54.1 from 47.4 in July and 49.3 in June and changing course after two consecutive months of declines. The results suggested Americans are beginning to feel better about their short-term economic outlook.
Both of the index’s metrics gained, with the Expectations Index starting out higher and growing more, leaping to 73.5, its highest level since December 2007, from 63.4 in July. The Present Situation Index rose to 24.9 from 23.3 in the previous month. That slight gain was due largely to consumers’ improved views of the job market, said Lynn Franco, director of The Conference Board Consumer Research Center.
“Consumers were more upbeat in their short-term outlook for both the economy and the job market in August, but only slightly more upbeat in their income expectations,” said Franco. “And, as long as earnings continue to weigh heavily on consumers’ minds, spending is likely to remain constrained.”
Historically speaking, confidence is still in the dumps. A year ago, The Conference Board’s index was slightly higher than it is now, with a reading of 58.5. But two years ago, the confidence index was perched at the comparatively lofty 105.
“Ultimately, from a spending perspective, what matters is consumer cash flow, and right now, they don’t have any,” said Scott Hoyt, senior director of consumer economics at Moody’s Economy.com.
And the weak job market is expected to continue to keep shoppers relatively cash-deprived.
“It’s going to be spring to summer next year before things start to really turn for consumers,” Hoyt said.
Still, the pickup in confidence was enough to help boost retail stocks on Tuesday, and the S&P Retail Index advanced 6.43 points to 367.09 as the Dow Jones Industrial Average increased 0.3 percent, or 30.01 points, to 9,539.29.
Leading the retail pack, and the 174 stocks tracked by WWD, was Casual Male Retail Group Inc., which raced ahead 41.6 percent to $3.10 after the company said a tight rein on costs and inventory helped it boost second-quarter profits by more than 90 percent. (For more about stocks, see page 14.)
Also on the rise were The Talbots Inc., up 10.7 percent to $6.65; New York & Company Inc., 9.4 percent to $4.76; Saks Inc., 8.5 percent to $6.41; Chico’s FAS Inc., 7.6 percent to $12.79; Dillard’s Inc., 7.5 percent to $11.71; Bebe Stores Inc., 6.2 percent to $7.67; Pacific Sunwear of California Inc., 4.2 percent to $3.72, and Macy’s Inc., 3.5 percent to $15.85.
On the vendor side, Perry Ellis International Inc. climbed 10.6 percent to $12.74 and Liz Claiborne Inc. increased 7 percent to $4.29.
President Obama took a break from his vacation on Martha’s Vineyard to renominate Ben Bernanke as Federal Reserve chairman, a move that signaled continuity to Wall Street.
“We are a long way away from completely healthy financial systems and a full economic recovery…we need Ben Bernanke to continue the work he’s doing,” Obama said.
The nation is also a long way from balancing its books and Obama’s budget office said increased spending in certain areas, including unemployment insurance and food stamps, would contribute to greater deficits. The federal budget deficit for 2010 though 2019 is now expected to hit $9.05 trillion, $2 trillion more than projected in February.