Consumer spending shows dramatic slowdown
Published: Tuesday, January 15, 2008 at 6:01 a.m.
Last Modified: Tuesday, January 15, 2008 at 12:00 a.m.
NEW YORK - More evidence of a dramatic slowdown in consumer spending surfaced Monday, as Sears Holdings Corp. warned that a drop in sales would result in a profit shortfall and the world's largest retail trade group issued a downbeat sales forecast for 2008.
Shares dropped among retailers from jewelry chain Zales Inc. to Saks Inc., which operates luxury retailer Saks Fifth Avenue, as the spending malaise appeared to deepen and spread beyond lower and middle-income shoppers to more affluent consumers. The decline in retailers' stocks continued a yearlong downward trend.
Consumer spending, which accounts for two-thirds of the nation's economic activity, had been showing resilience even as gas prices rose and the housing market fell. But recent data point to a sharper pullback, a trend that may tip the economy into recession.
American Express Co., whose customers are generally affluent, said Thursday it expects slower spending and more missed payments on credit card bills to hurt its profit throughout 2008. Upscale jewelry retailer Tiffany Co. cut its 2007 profit outlook on Friday as it reported a 2 percent decline in same-store sales, or sales at stores opened at least a year, during the holiday period.
On Monday, Sears Holdings, which owns Sears and Kmart stores, blamed growing competition, the housing market slump and consumers' credit fears for sales figures that were expected to slash fourth-quarter profit by as much as 57 percent from the year-ago period. Meanwhile, the National Retail Federation predicted retail sales in 2008 will grow at the weakest pace in six years.
The reports come on the heels of sales reports Thursday by major retailers that showed the weakest holiday period since 2002.
"When all is said and done, we have probably entered into a recession. The weakness in the holiday season was the tipping point,'' said Carl Steidtmann, chief economist at Deloitte Research, who forecasts a decline in consumer spending that takes inflation into account in coming months. It would be the first since 1991, when the savings and loans crisis precipitated a recession.
Steidtmann noted that rising employment and incomes had helped offset surging gasoline prices and mortgage payments.
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