BEIGE BOOK: RETAIL SALES ARE SLUGGISH
Byline: Carol Emert
WASHINGTON — The latest Federal Reserve survey of regional business conditions does little to break the monotony of the recent downbeat reports on retail activity.
While merchants in sections of the Midwest and South reported better than expected sales, retail business in the second half of October and in November was disappointing in most parts of the country, according to the survey, which was released Wednesday.
Known as the beige book, the survey, conducted every six weeks, tracks business conditions in the 12 Fed districts around the country. Retailers in several regions reported higher than desired inventories, and most said they were offering unusually heavy discounts and promotions.
In the New York district, virtually every retailer surveyed reported below-plan sales in October that ranged from declines against last year to a 5 percent increase, the report said. Sales in early November rebounded slightly with a period of cold weather, but in the New York City area, activity returned to subdued levels later in the month. One retailer blamed Thanksgiving weekend weakness on this year’s late Chanukah.
According to the report, New York retailers expect sales gains of 2 to 6 percent for the holiday season against last year. Two contacts reported higher than ideal inventories, although others said levels were about right.
Boston area retailers reported “fits and starts” in sales in the second half of October and in November. Apparel fared poorly, and off-price discounters reported sluggish movement of winter clothes. Strongest sales were in jewelry, accessories and electronics.
Concerned about the holidays, Northeastern retailers said they are planning significant promotions to garner estimated sales gains of 1 to 6 percent for Christmas.
Department stores and discounters in the Philadelphia region reported that cold weather boosted winter apparel sales late in November, although discounters appeared to perform better than other retail categories, the Fed said. Christmas shoppers in the area appeared to be spending only modest amounts, and merchants expected dollar increases of about 4 percent, roughly the same as last year.
November sales also picked up in the Chicago district relative to October, with cold weather boosting apparel sales last month. Nevertheless, merchants are still expecting lower sales growth this year than last.
Chicago retailers “generally plan to increase promotional activities and start these promotions earlier than last year,” the beige book said. “Competition has been intense in major metropolitan areas of the district, with some downtown area department stores cutting prices to attract customers from discount outlet malls.”
The Cleveland and Atlanta districts were brighter spots for apparel retailing this fall, although economic strength in those regions was also responsible for labor market tightness, according to the Fed survey.
In the Atlanta region, sales in November rebounded strongly from a disappointing showing in October. Most of the district retailers surveyed said Thanksgiving weekend sales met or exceeded their expectations, with apparel making “an unexpectedly strong showing.”
Promotions on apparel and other items helped boost retail sales to levels that either met or surpassed the expectations of Cleveland district retailers, according to the book. For Thanksgiving weekend, “several respondents report strong traffic and suggest that sales were well above last year’s level,” the report said.
Performance was lackluster in other parts of the Midwest, however. Minneapolis district retailers said they had increased advertising and promotions, but sales continued to come in below plan.
In the Dallas area, department stores and discounters “said holiday sales were below expectations and were weaker than national sales.”
Apparel makers have also been hurt by weak retail sales. Boston-area producers said they were being squeezed by rising cotton prices and falling retail prices. “Most contacts plan little or no growth in employment and capital spending in 1996…,” the survey said.
Sluggish demand and foreign competition are also responsible for apparel plant closings in the St. Louis district and the resulting loss of almost 2,000 jobs, the Fed said.