Resolving Iraq conflict seen as key to consumer spending

For Immediate Release
March 26, 2003

LANSING — Resolving the conflict with Iraq will do the most to stimulate consumer spending, Michigan retailers say. They also rank stock market vitality and job growth high on the list of factors leading to improved sales.

Those findings are contained in the monthly Michigan Retail Index survey, a joint project of the Michigan Retailers Association (MRA) and Federal Reserve Bank of Chicago.

When asked to rank five factors in importance from 1-5, resolution of geopolitical uncertainty came out highest, with an average of 2.2. It was followed closely by stock market recovery, 2.4, and job growth, 2.6. Tax cuts were fourth, at 3.7, and less consumer debt trailed at 4.1. The survey was conducted while tensions in Iraq were high, but before the war actually began.

Meanwhile, the monthly sales performance index for February declined slightly from January. Twenty-seven percent of retailers increased sales from the same month a year ago, while 61 percent experienced declines and 12 percent reported no change. The results create a seasonally adjusted performance index of 34.3, down from 35.6 in January.

For the March-May period, 52 percent expect to increase sales from the same period last year, while 22 percent forecast declines and 26 percent project flat sales. The results create a seasonally adjusted outlook index of 61.2, up from 60.5 in January.

"Retailers clearly believe that uncertainty over what was going to happen in Iraq, and now war itself, are partly responsible for a continued lag in retail sales. They believe that resolution of the conflict, together with an improved stock market and other signs of a stronger economy, will turn things around," said Larry Meyer, MRA chairman and CEO.

The Michigan Retailers Association is the unified voice of retailing in Michigan and the nation’s largest state trade association of general merchandise retailers.

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