Back to school numbers not promising for retailers

The latest flat retail figures suggest that shippers may be reconfiguring their supply chains, said a prominent economist.

Augusts’ retail sales are pointing to an economy that has stalled – total sales were flat and sales excluding autos inched up 0.1 percent. Auto dealerships fell in August after posting gains in June and July. Clothing, department stores, and restaurants fell for the second month in a row. This is pointing to a very weak back-to-school shopping season and a consumer that is facing strong headwinds.

The second quarter was not a good month for consumers or retailers. This retail sales report, the August employment report, and the Reuters/University of Michigan consumer sentiment index are indicating that consumers are pulling back and do not feel very optimistic.

“The American economy is in a Catch-22 situation - companies will not hire at a faster rate until they see consumers spending more, consumers will not start spending until the employment situation improves,” said IHS Global Insight U.S. Economist Chris Christopher. Since the back-to-school shopping season looks very weak, retailers will be planning for a relatively weak holiday season.

IHS Global Insight expects personal spending adjusted for inflation to increase at a 1.5 percent annual rate in the third quarter – not a very robust number.

Christopher told SCMR that computer manufacturers and software providers may be joining the fashion industry in a shift away from air to ocean as a consequence:

“Given the faster transit speeds and delivery options ocean vessels are now providing, it appears that shippers may pursue this strategy,” he said. “The LTL industry is also moving goods at an accelerated pace to keep up with ocean cargo discharge.”

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