WASHINGTON — White House officials are eager to reassure consumers nervous about parting with money this Christmas season.
This story first appeared in the December 12, 2002 issue of WWD. Subscribe Today.
It’s all part of the Bush administration tackling the uncertain economy with increased public attention, which began last Friday with the abrupt ouster of Treasury Secretary Paul O’Neill and chief White House economic adviser Lawrence Lindsey. Their departures occurred as the government reported November’s unemployment rate hit an almost nine-year high of 6 percent.
Today, with the release of November’s national retail sales report, Commerce Secretary Donald Evans is scheduled to be joined by National Retail Federation president Tracy Mullin to discuss the numbers at a news conference.
White House officials point to increased factory productivity, low interest rates, stable wages and the absence of inflation as economic pluses. However, drags include anemic consumer confidence, rising unemployment and declining business investment.
With consumer spending accounting for two-thirds of the nation’s Gross Domestic Product — and consumer dollars driving a lopsided recovery from last year’s brief recession — it’s easy to see why today’s release of November’s retail sales figures is getting so much attention.
In October, retail sales figures collected by the government jumped 4 percent against September, but gains weren’t uniform. For example, sales at clothing and accessories stores rose about 4 percent for the month and against October 2001, while department store sales increased 1.2 percent in October, but fell 0.8 percent over the year.
If the retail industry’s own sales figures are any measure, the government’s November sales figures could show little improvement. As reported, most stores posted sales declines or weak gains for the month and against November 2001.
The NRF’s Mullin said she’s encouraged by the Bush administration’s increased public focus on the economy so consumers won’t be as edgy. She praised the forced resignations of O’Neill and Lindsey from the President’s economic team as a reassuring signal to Wall Street and consumers that the White House is on top of things. Likewise, Mullin said selection of railroad executive, CSX Corp. chief executive John Snow, who had stints in the Ford and Nixon administrations, to replace O’Neill was a good choice since he’s well versed in lobbying Congress.
Although now in Republican hands, the White House will need Snow on its team to lobby Democrats, particularly in the Senate, to pass tax cuts of up to $350 billion over 10 years that President Bush is poised to propose. The tax package is expected to include an acceleration of income tax cuts in 2003 scheduled for 2004.
“From everything we know about Snow, he seems to be a good communicator and that will be a real asset,” said Mullin, who hopes Snow will use his job as a “bully pulpit” to reassure jittery consumers. “This has been a tough year for retailers.”
Retailers are nervous about how their year will end in their biggest shopping season. An International Mass Retail Association poll released Wednesday, 14 days before Christmas, said 28 percent of consumers had not started shopping yet, compared with 25 percent for the same period last year. Likewise, fewer had finished their Christmas shopping, 14 percent, down from last year’s 16 percent. However, of those who’ve started shopping, consumers said they were spending about the same amount as last year, IMRA said.
To replace chief economic counsel Lindsey, Bush is expected to soon name Stephen Friedman, a principal in the Marsh & McLennan Capital Corp. and a former Goldman Sachs chairman. Friedman is also a Wal-Mart director who serves on the retail giant’s strategic planning and finance committee, which “reviews important financial decisions” and “engages in long-range strategic planning,” according to the company’s proxy statement.
In addition, Bush this week named William Donaldson, founder of the investment firm Donaldson, Lufkin & Jenrette, to run the embattled Securities and Exchange Commission as it tackles the various cases of corporate malfeasance that have eroded investor confidence.
Lisa Wolski, tax counsel with IMRA, said the selections of Snow and Friedman, in particular, are good moves to restore consumer confidence in the economy. “It’s my understanding they both plan to be better spokespeople for the President’s economic program,” in contrast to their predecessors, she said. Critics of O’Neill and Lindsey said they were too outspoken regarding some of the economy’s downsides.
“In the short term, everyone realizes it’s important to get the economy going at a faster clip right now,” Wolski said. “If you get the economy moving again, then revenue will pick up with the government…and that will solve the deficit.”
In October, the federal government ended its fiscal year 2002 with a $159 billion deficit, about 1.5 percent of the nation’s GDP. The deficit has grown, in part because of increased federal costs for homeland security, the war on terrorism and a general decline in revenues.
Bud Konheim, president of Nicole Miller, argues Bush’s new economic team only amounts to “Band-Aids” and “window dressing.” He said there’s an overall uncertainty pervading consumer psyches, including confusion about personal safety. “I don’t see people in charge of the war on terrorism saying, ‘We’re making tremendous strides, things are functioning smoothly and it’s very unlikely people will get hit by terrorist strikes,’” Konheim said. “The message instead is, ‘Hey, everybody, don’t go shopping today.’”