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State Street Shopping

Meaghan Norman/Medill

Hustle and bustle during lunch hour on State and Madison streets.  But inside many stores it isn't as busy.

Consumers expressed confidence, but before the fall

by Meaghan M. Norman
Sep 30, 2008

Consumer confidence rose in September, but The Conference Board said its survey did not reflect the financial crisis late in the month.

While the Board's Consumer Confidence Index posted a slight gain of 1.3 points from August to September, Lynn Franco of the Board  said it didn't reflect an entirely accurate picture.

“These results did not capture all of the tumultuous events in the financial sector this month, and until the dust settles a bit more, we will not know the full impact on the consumers’ expectations.”

The Present Situation Index decreased 6.2 points to 65.0 from 58.8 a month earllier.  But, the Expectations Index, which did not take into account the current financial crisis, increased 6.4 points to 60.5 from 54.1 in August.

Customers and business owners are feeling the consumer crunch.  Lisa Cohen, a Chicago resident shopping at the farmers’ market at Dearborn and Adams streets in the Loop, observed that shoppers were sparse and were indicative of a trend.

“Sears and Nordstrom were basically empty, too, and I thought, I shouldn’t be buying shoes with the current economy,” Cohen said.  “But I think if you want something, you should have it, as long as you can afford it of course.”

A seller at the market, Andrew Chanda, said his family business, Simply Best, a purveyor of specialty goods such as hot sauces, oils and mixes, also has seen slower business.

“I haven’t been doing as well.  Farmers are doing okay but the specialty goods aren’t doing as well right now,” Chanda said.  “People still have to eat, but they’re cutting corners.”

The holiday shopping season is still weeks away, but Peter Gill, communications director for the Illinois Retail Merchants Association, said holiday sales are expected to rise only between 2 percent to 2.5 percent, which is considered flat.  A typical season posts a 4 percent to 4.5 percent growth. Gill said it could be the slowest season in about six years.

“People need to spend during the holidays because there are obligations to mothers, brothers, sisters, but at the same time we expect a lot less spending in discretionary items.”  Gill said consumers will be "buying down," meaning they will make an effort to spend less.

While holiday spending is widely expected to be soft this year, Halloween might be the one holiday that lifts people’s spirits.  The National Retail Federation’s Halloween Consumer Intentions and Actions Survey, conducted by BIGresearch, predicts that more consumers plan to celebrate the holiday this year, 64.5 percent versus 58.7 percent last year.

The reasoning is that the Halloween season is an excuse to forget about the economic struggles of day-to-day life, escape reality and have fun.

This year, according to the federation, the average person plans to spend $66.54 on Halloween, up from $64.82 one year ago.  Total Halloween spending for 2008 is estimated to reach $5.77 billion.

Bart van Ark, vice president and chief economist for The Conference Board, recently wrote, “Although the direct impact of the crisis will be felt primarily in the financial industry itself, the indirect effects may become more severe as the rapidly unfolding deleveraging process raises the cost of borrowing across the economy.”

“Our U.S. forecast remains very lukewarm for the next couple of months, although the U.S. economy is likely to continue its slow growth,” van Ark said.

 Gill said the retail federation does expect an economic turnaround in the retail industry, but not until the second half of next year.