Modest ’06 forecasts despite strong January

Many Michigan retailers expect to increase sales by 2 percent or less this year, but January’s best monthly numbers in more than a year have started 2006 on the right track.

The Michigan Retail Index, a survey project of the Michigan Retailers Association (MRA) and Federal Reserve Bank of Chicago, found that 35.7 percent of retailers project annual sales growth of 0–2 percent this year. The second largest group in the survey, 19.9 percent, predict sales declines, while 14.8 percent forecast sales growth of 2–4 percent, 10.7 percent are looking at increases of 4–6 percent and 18.9 percent see sales rising above 6 percent.

For comparison, Michigan retailers’ sales growth averaged 2.8 percent in 2005, according to the December Index survey. It was 2.5 percent in 2004.

“January’s sales were the best monthly numbers since April 2004 and the best in January since 2002,” said MRA Chairman and CEO Larry Meyer. “However, much of that growth can be attributed to an extension of the holiday shopping season—through the redemption of gift cards sold before Christmas. Retailers are rightfully cautious about 2006 because of all the automotive layoffs and other grim economic news.”

The Index found that 43 percent of retailers increased sales in January over the same month last year while 42 percent recorded declines and 15 percent saw no change. The results create a seasonally adjusted performance index of 54.3, up from 47.7 in December. That’s the best month since 56.7 in April 2004 and the best January since 56.1 in 2002.

In addition, 51 percent believe their sales will increase for February–April, while 19 percent forecast declines and 29 percent project no change. The results create a seasonally adjusted outlook index of 62.6, up from 60.9 in December.

Sales tax collections totaled $629.1 million in January, which topped last year’s level by 12.7 percent. This large increase reflects the fact that December ended on a weekend, so some December tax collections spilled over into January.

Complete results of this month’s Michigan Retail Index—including data on sales, inventory, prices, promotions and hiring—are available at www.retailers.com/news/retailindex.html. The website includes figures dating back to July 1994.

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