Recovery distant, but analysis hints at future spending

“When consumers pull back very sharply, there is a lot of pent up demand toward the end of a recession when people are feeling more confident,” says Stan Geberer, an economist with Fishkind & Associates.

Whether compared to 2007 or 2008, Florida retail gross sales numbers for this year are down markedly in the face of a grueling recession. But there’s a hint of recovery in the air, and pent-up demand that could yield a better Christmas shopping season than most expect.

Through July of 2009, gross sales as measured by the Florida Department of Revenue are down by more than $64.6 billion - or 11.7% - compared to the same period in 2008. Compare this year to the peak in 2007, and the percentage loss rises to 12.1.

Falling consumer confidence and a declining population base are among the reasons, said Stan Geberer, an economist with Fishkind & Associates, an economic and financial consulting firm in Orlando. While consumer confidence has risen a bit since the first quarter and the growth in unemployment seems to be leveling out, any improvement in consumer spending is likely to be modest, Geberer said.

“I think all of those things suggest we’ve perhaps moved from a very bad situation to something less bad. I don’t think that portends well for sharply increasing consumer spending during the second half of the year,” he said.

Yet, there could be some improvement at Christmas approaches. Preliminary sales numbers for August show a 9.94% decrease over the same month in 2008 and a 6.7% drop from August 2007.

The fact those numbers are better than the trend is encouraging, Geberer said, but it also suggests the road to recovery is a bit longer yet. More important, he said, will be the role of pent-up demand.

“This has been a long, deep and scary recession. It has been associated with a lot of uncertainty because of the elections and its global aspects. When consumers pull back very sharply, there is a lot of pent up demand toward the end of a recession when people are feeling more confident,” Geberer said.

“The big losses in retail sales are in durable goods like cars and refrigerators. Big-ticket items declined sharply. At some point, all those things wear out. Eventually, they’re going to have to replace some of the things that simply break down. I suspect there is a fair amount of pent-up demand building in the general population. Once people are more confident they’ll keep their jobs, they’ll be more interested in spending a bit.”