Recession mindset takes toll on retail sales
VIRGINIA GALT AND MARINA STRAUSS
With files from reporter Matt Hartley and The Canadian Press
December 23, 2008
TORONTO -- Fear of job loss is ushering in a new era of frugality, as some retailers saw a sharp decline in pre-Christmas sales and consumer confidence plunged to its lowest level in 26 years.
The monthly consumer confidence index by the Conference Board of Canada fell for a third month in a row to its lowest level since the deep recession of 1982, with half of respondents saying they expect there will be fewer jobs in their communities six months from now, and more than a quarter saying their families are worse off than they were six months ago.
Consumers are caught in a "very negative downward cycle of a psychology of recession," Glen Hodgson, the Ottawa think tank's chief economist, told a news conference yesterday.
After months of hearing about the deteriorating global economy, "that loss of confidence has become very personal. People are now worried about their financial circumstances and about their job," he added.
Their worries are showing up at the mall. Amid the crucial holiday shopping season, same-store sales saw their steepest decline, plummeting an average of 10.2 per cent the week ended Dec. 13, according to a survey of 27 retail chains by RSM Richter.
Same-store sales measure those at outlets open a year or more, and are considered a crucial retail barometer. Sales have been dropping over the past several weeks, RSM retail consultant Lynn Bevan said.
And Boxing Week business may not be nearly as strong as it has been in past years, Ms. Bevan said. Retailers have already been slashing prices to lure customers, leaving fewer attractive deals for the post-Christmas period, she said.
"People are just worried about keeping their jobs," she said. "Until that really stabilizes, I think people are just going to conserve cash. People are very nervous about what 2009 has to bring. There is so much media about the economy and how it's going to get worse in 2009."
At electronics giant Best Buy Canada, customers are snapping up less expensive items, such as video games, MP3 players and digital cameras, Best Buy spokesman Scott Morris said. But shoppers are deferring their bigger-ticket purchases of products such as flat-panel televisions until Boxing Day, he said.
"We've been through it before and people are gun-shy," said Richard Talbot at retail specialist Talbot Consultants International. "The steady stream of bad news in the U.S. and Europe has a ripple effect."
Likely victims: Big-ticket items and luxury goods, Mr. Talbot said. "Furniture, I suspect, will take a big hit. I went through and looked at the Brick and Sears the other day. You could have fired a cannon through there."
At the Eaton Centre in downtown Toronto yesterday, shoppers went shoulder to shoulder in search of the final items on their holiday shopping lists. But some shoppers, worried about the prospect of rising unemployment, were tightening their purse strings.
"I'm spending less, significantly," said Michael Leahy. "We all know people who have concerns about their jobs and I'd be crazy if I said that wasn't a concern."
It's little wonder Canadian consumers are feeling spooked, economist Dale Orr, managing director of Global Insight Canada, said in an interview yesterday. "Canadians have been faced with unrelenting bad news on the economics front in recent months," Mr. Orr said. "The stock market is down 40 per cent this year, house prices are down, and unemployment is rising."
Still, the picture is nowhere near as dire in terms of job losses as the recession of the early 1980s, when unemployment spiked at 13 per cent, or the recession of the early 1990s, when unemployment rose to 10 per cent.
Now, unemployment is at 6.3 per cent, although it is expected to rise above 7 per cent next year, the Conference Board of Canada's Mr. Hodgson said.
The Conference Board survey found Canadians' confidence about the economy declined 3.3 points to 67.7 in December. That's the lowest since 1982, when the index fell to 63.
One bright spot in the consumer confidence survey: Some shoppers are taking advantage of price cuts on TV sets, fridges, stoves and washing machines, Mr. Hodgson said. "And automobiles, of course, are going to be at rock-bottom prices for some time to come," he added.
The outlook for 2009 consumer confidence depends on what the federal government comes up with in the way of a stimulus package and what happens to the overall unemployment rate, he said.
Confidence will start to return as the majority of Canadians realize that they are keeping their jobs. "When that starts to happen, you'll see a change in attitude," Mr. Hodgson said.