The National Retail Federation is forecasting a very gloomy 2009 retailing year. Big surprise.
But in light of a comment made by Wichita State economist Stan Longhofer last week, I wonder if Wichita’s retailing year won’t be better than anticipated.
Longhofer opined that Wichita consumers – the context was homebuyers, but it’s applicable across many sales sectors, I think – need a little security to buy. They need a sense that the government’s got a grasp on the economic problems, that their jobs are safer, before they spend. Some think that sense will arrive sometime this summer.
Certainly, that sense doesn’t exist yet. I spent a sick day Tuesday drifting in and out of sleep, listening to a steady stream of bad economic news on television, none of which I really question. I hear a lot of businesspeople wanting to kill the messenger, but not a lot of them refuting the reports.
But my sense is that we’re all so hungry for some economic good news that we’ll react strongly. It might be as simple as a big airplane order in Wichita, or as complicated as a return to some form of national economic growth. Whatever the trigger, I suspect retailing in Wichita will rebound faster than people think.
8 Comments
I think we underestimate the role of the stock market in all this. People seeing their nest eggs evaporate tend to ‘pull in their horns.’ Another factor is the banks over-reacting on lending. If I cannot get a decent car loan, home improvement loan, or a bank unilaterally cancels my HELOC then my spending is immediately impacted. And, from there, it snowballs as the contractors/merchants I would have bought from then see THEIR revenues dry up.
It’s a multi-faceted problem for the consumer, you’re right.
I wonder what the turnaround trigger might be.
Bill – I will give you my guesses – it will be two parts. Some decent upturn in the stock market. That will make my 401k etc look better; encouraging me to get out more. Then the banks start rational lending – not lending to anyone with a pulse but also not denying loans to everyone. That will allow me to re-enter the ‘big’ consumer markets again.
The key is to re-establish velocity of money.
I think you’re pretty close. Any one of the above is probably enough to trip the trigger, but any combination of above works.
Ben, you are right about the 401(k) thing. And the banks and Wall Street knew it when they pulled the fire alarm. Nothing whips up public support for a bailout like watching your retirement plans evaporate.
People wont spend or borrow money again until they feel like their jobs are secure. The hangover from all the layoffs and threatened layoffs will last for a lot of years.
Heck of a job, bushie!
I was watching C-Span and they had a panel of leading world-wide renown Economist. What was surprising is that they agreed that it wasn’t deregulation that caused this financial crisis, (Which is a the whipping boy now.)
It was a multi-faceted problem starting with the Community Reinvestment Act and with Fannie Mae and Freddie Mac getting into the Subprime loan business (nearly 25% of all Subprimes were purchased by Fannie Mae and Freddie Mac).
The Glass-Steagall Act had nothing to do with the mortgage meltdown. In fact, all of the Economist on the Panel (this panel included Economist from the Brookings Institution, which is widely known as a Liberal Think-tank), said that Glass-Steagall Act was very bad law and it was right for President Clinton and his Administration, along with the support of Phil Gram to end it. In fact, the economist said that the repeal alone soften the blow of what could have been much worse; an utter complete economic meltdown.
The two problems was that regulations on the books weren’t being enforced (trying to reign in Fannie and Freddie) and new ones weren’t being created fast enough to catch the innovative financial instruments (CDS, MBS and etc.)
Their conclusion was to dismantle any quasi-government entities like Fannie and Freddie (you can’t have a profit institution that is government guaranteed) and keep up with creative finance with sound regulations and enforce the laws already on the books and get rid of the bad ones. This will spur confidence in the market.
Right now there is no confidence because government is the last resort now. Begging for bail-outs and taxpayers monies will never show business or consumer confidence.
ictBest, that was an excellent post. You hit the nail squarely on the head. Thank you.
A much larger part of the subprime/alt-a problem lies in the higher end – all those big mortgages on McMansions.