October 24, 2001

Retailers project uneven gains for holiday season

LANSING -- Michigan retailers are projecting an overall 6-percent increase in holiday sales this season, but only half expect to benefit.

The latest Michigan Retail Index found that 49 percent of retailers expect 4th Quarter sales to top last year's, while 31 percent project sales decreases and another 20 percent see flat sales. Overall, their sales projections average a positive 6.0 percent for the season.

The Index is a joint project of the Michigan Retailers Association (MRA) and the Federal Reserve Bank of Chicago and is based on a monthly survey of MRA members.

"While the outlook is positive, it is the most subdued holiday shopping forecast since we began tracking expectations through our Michigan Retail Index in 1994," said Larry Meyer, chairman and CEO of MRA and a former director of the Michigan Department of Commerce.

"Despite the lackluster economy, Michigan retailers see bright spots that can make this a better season than some are forecasting. These include a new emphasis on home, family and friends in the wake of the September 11 tragedies, plus lower gasoline prices, lower interest rates and lower federal taxes."

The results of the monthly survey also show a sharp decrease in sales activity during September. Twenty-seven (27) percent of retailers increased sales over the same month a year ago, while 64 percent said sales declined and 9 percent saw no change.

In testimony before the Michigan House Commerce Committee earlier this week, Meyer advocated a week-long sales tax holiday across the nation during the holiday shopping season to spur consumer spending and help jumpstart the economy. He urged support for a plan expected to be introduced soon in Congress calling for a brief sales tax holiday, with Washington reimbursing states for lost tax revenues.

"Consumer spending accounts for more than two-thirds of our country's Gross Domestic Product," Meyer said. "In any consideration of ways to stimulate the economy, increasing retail sales should be first on the list."

The Michigan Retailers Association is the unified voice of retailing in Michigan and the nation's largest state trade association of general merchandise retailers. MRA's more than 5,500 retail business members operate more than 12,000 stores across the state.

Note: William Strauss, Senior Economist and Economic Advisor with the Federal Reserve Bank of Chicago, can be reached at 312.322.8151.

Michigan Retail Index
September 2001 results

September Activity
(numbers in parentheses indicate August results)

Expectations for Next 3 Months
(numbers in parentheses indicate August results)

September Sales Activity & Expectations for Next Three Months, by Region
(numbers in parentheses indicate expectations for next three months)