What a difference a war makes.
The United States’ largest retail trade group Tuesday revised its 2003 forecast for growth in consumer spending to 3.8 percent, down sharply from 5.6 percent predicted in January. The National Retail Federation blamed the slower pace on the war with Iraq, which it said is constraining spending by consumers and businesses.
The retail federation, however, sees brighter times ahead and thinks spending on general merchandise should improve once the conflict is resolved, likely by the second half of the year.
A 3.8 percent increase in retail sales would be the smallest since the group started tallying the figures a decade ago, but only slightly less than the 3.9 percent gain in 2001. Last year general merchandise sales rose 5.1 percent from the year before.
The Washington-based group releases a forecast at the beginning of every quarter. “If the war ends swiftly and shoppers start spending, in July we could change the forecast positively,” spokeswoman Ellen Tolley said.
Michael Niemira, an economist at the Bank of Tokyo-Mitsubishi, said sales are running below plan for retailers. Its index of chain store sales dropped 1.4 percent for the week ending Saturday compared with the week before. March sales are expected to be flat to down 1 percent, but the fact that Easter falls in April this year instead of March contributed to the slowdown.
Wal-Mart Stores and Federated Department Stores said consumers spent less last week and stayed home to watch war coverage on TV. Federated, owner of Macy’s and Bloomingdale’s, said March sales at stores open at least a year will drop by about 7 percent.
Even Pier 1 Imports, a home furnishings retailer that has been on a roll, said same-store sales for March will fall 5 percent to 7 percent, compared with an increase of 10 percent a year ago. It expects first-quarter profits to decline after six quarters of higher earnings.