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Retail Newsline: Consumer Spending and Confidence Up, Up, Up

By Garrick Brown, Vice President, Research – West Region

TwoArrows-resized-600For Wall Street, August 2015 was the most challenging month Two Arrowsin years. The Dow Jones began the month at 17,598 and ended it at 16,528. NASDAQ wasn’t much better and oil prices continued to plummet. Uncertainty in China rippled out across the globe sending markets into a tizzy of buying and selling in a cycle that continues to today. Against that backdrop it would seem only natural that consumer confidence would take a blow or two. Yet, numbers released this morning by the Conference Board indicate that it didn’t. The Consumer Confidence Index (CCI) now stands at 103.0, up from August’s reading of 101.3. Though those gains are fairly minimal, gains seem pretty amazing under the circumstances. But are they really?

Job numbers have remained solid, hiring is up, unemployment is at a seven year low and GDP growth for Q2 was upwardly revised to a robust 3.9%. If you weren’t a financial analyst glued to Bloomberg all day you might very well not think all that much about what was going on with the Chinese stock market or the freak out it was causing on Wall Street. And that is apparently what happened.

But not only did consumer confidence remain resilient… perhaps more importantly, consumer spending blossomed. For the second month in a row consumer spending in the US grew by 0.4%. It had been forecast to increase by 0.3%. Meanwhile, incomes grew by 0.5%.

All of these things point to the fact that foreign financial crises rarely have much of a deep impact here. The reason is simple; our economy remains astonishingly insular with 70% of our GDP still comes from personal consumption. Our economy might not be an island, but it is pretty close to being an isthmus.

What is interesting is what these numbers is what they might portend for this year’s holiday sales season. Over the last decade or so whenever we have seen August consumer spending growth at 0.3% or more, we have seen corresponding holiday sales growth at above average levels. I will be tackling this subject and others next week when I release my annual holiday sales forecast.

Last year I initially predicted 3.5% sales growth for the holidays, though I revised that upward to 4.0% in early October as it became increasingly clear that gas prices would continue to fall deep into the winter months. So I wasn’t that far off—according to the National Retail Federation holiday season sales increased by 4.1% last year. Of course, taking two guesses is kind of cheating so this year I promise you no revisions…

I know I am keeping it short this week, but that’s because I have plenty more for you to read about in this week’s “Who is Doing What in Retail” section.

This post is commentary from the latest weekly edition of our Cushman & Wakefield Retail Newsline, which you can subscribe to for free by e-mailing garrick.brown@cushwake.com.

garrick-brownGarrick joined Cushman & Wakefield (formerly DTZ / Cassidy Turley) in October 2010. He serves as Vice President of Retail Research for the Americas. He speaks frequently at industry events and has been a keynote speaker at symposiums, conferences and market forecasting events for groups like the Appraisal Institute, Urban Land Institute, CREW, ICSC and PRSM. He is also a member of Lambda Alpha International, an invitation-only land use society for those who are involved in the ownership, management, regulation and conservation of land, but also those who are involved in its development, redevelopment and preservation.

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