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ICSC Projects a 1.8% Decline in Retail Sales for 2009

A dramatic change in consumer spending emerged in 2008. U.S retail sales for the year, not including restaurant food sales, were down 0.9% from more than $4.053 trillion in 2007. Indeed, consumers felt less wealthy as a result of the nationwide decline in home prices, and cut back on discretionary spending.

However, 2009 “is really a transition year” toward stronger economic activity, “even if it is modestly stronger,” according to Michael Niemira, vice president and chief economist for the International Council of Shopping Centers (ICSC), who presented a 2009 outlook for the retail industry during a teleconference yesterday. ICSC forecasts a drop in retail sales of 1.8% this year, down from sales activity of $4.018 trillion in 2008.

Even then, Niemira predicts that consumer spending, after adjusting for inflation, will grow in the second half of 2009 — and by more than 2% in both the third and fourth quarters of the year.

Another sign to watch for that could indicate growth in the retail sector is motor vehicle purchases, according to Niemira. Consumer spending on motor vehicles has historically been a leading indicator of retail performance in non-automotive sectors as well.

The automotive sector has seen the impact of a pullback in consumer spending earlier than some other discretionary consumer spending areas. For instance, in 2006, sales of motor vehicles gained only 1.9% from 2005 levels of $884 billion, after growing 2.6% in 2005; while sales of electronics and appliances were up 6.6% in 2006, compared with growth of 7.7% in 2005.

Sales of motor vehicles in 2008 were down 12.5% to $811 billion from the previous year. For 2009, ICSC forecasts a decline of 7.6% in motor vehicle sales from last year.

In fact, after subtracting the impact of motor vehicle and gasoline sales, retail sales were actually up 1.8% in 2008 and will gain 2.5% in 2009, according to the ICSC forecast.

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