January 11, 2011
In a world where mainstream media has become overly fond of alliterative headlines, “frugality fatigue” has emerged to characterize the view that consumers have loosened their belts and begun to spend some money. That’s far from the consensus view, but if it proves to be correct it would be the clearest indication that the economy is recovering strongly.
One analyst who is convinced the days of rampant penny-pinching are behind us is Craig Johnson, with whom I spoke last week. Johnson runs Connecticut-based Consumer Growth Partners, a consulting and research firm focused on consumer service industries. His clients are among the largest retailers, investment firms and corporations, for whom he divines the key trends in consumer behavior.
Over the last three years, the retail sector has been in a ditch. Retail sales slowed in the run-up to Lehman’s collapse in September of 2008, at which point they fell off a cliff, according to Johnson. No income bracket was spared, and everyone stopped spending, leading to a disastrous 2009 for retailers.
The nadir came that year, when retail sales declined 2.4% year-over-year, the first such decline since the oil crisis of the early 1970s. It wasn’t so much a question of frugality, Johnson said, but rather the byproduct of a deep recession.
Today, however, we are witnessing a “resurgence in retail,” Johnson said. In late 2009, Johnson predicted 4.6% growth in retail spending for 2010, and he now expects the final numbers to come in at between 4.7% and 4.8% – the strongest growth in years, he said.
Johnson’s anticipated growth in 2010 will be consistent with trends over the last decade, as can be seen from the data below:
Annual Retail Sales and Consumer Growth Partners 2010 Forecast: Total Sales Growth 4.6% YoY
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