Byline: David Moin

NEW YORK — Retailers don’t panic. The country is not plunging into a recession.
That’s the official 2001 forecast from the National Retail Federation and its chief economist Rosalind Wells. “We are not predicting a recession,” stated Wells, at a press conference Monday at the 90th annual NRF convention here at the Jacob K. Javits Convention Center. “A very slow first half will give way to a stronger second half.”
Among Wells’s generally upbeat projections:
A first-half slowdown ending in a soft landing.
GDP will increase 2.3 percent in the first half and 3.2 percent in the second half, whereas a recession is characterized by two consecutive quarters of negative GDP growth.
General merchandise, apparel and furniture and home furnishing [GAF] sales will increase 4.8 percent for the year, with quarterly gains from 4.5 to 5 percent.
Real consumer spending will increase 3 to 3.5 percent, falling behind last year’s 5 percent pace.
Apparel sales should grow this year, since it does not represent major consumer expenditures, unlike appliances or electronics.
The housing market is actively stabilizing — “not falling apart.”
Consolidations in retail will continue, perhaps more prevalent among hardline chains.
Additional interest rate cuts by the Fed soon, possibly one-quarter of a percent this month. The Fed this month dropped the federal fund rate to 6 percent and the discount rate to 5.75 percent, which should help home and home-related sales in particular. The impact of rate cuts on retailing won’t be immediate, possibly not until midyear, Wells said. “It takes time for these interest rate cuts to work.”
Wells was also quoted in NRF’s Winter 2001 Retail Sales Outlook as predicting “tame” inflation due to productivity gains. “Since our forecast envisions a slowdown in business capital spending this year, a critical question is whether or not the productivity gains will be large enough to continue to keep unit labor costs and inflation subdued. We expect that they will. Inflation is not anticipated to present a problem anytime soon.”
Wells said retail sales began decelerating in the second quarter of 2000, and that the slowdown hit durables harder than soft goods. Department stores, discounters and apparel specialty stores slowed little during 2000 until the fourth quarter, she added. However, holiday 2000 was not a disaster, she said, with general merchandise sales increasing 5.8 percent and apparel specialty sales gaining 7 percent. The poorest categories were home furnishings, electronics and jewelry. PCs slumped, she noted, though there was still demand for digital cameras and wireless phones.

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