DETROIT RESCUE
Retailers’ blues
A not-so-jolly holiday season for the nation’s retailers ended with complaints that activity was anemic, lackluster and unspectacular. Despite doorbuster specials and half-off newspaper coupons, merchants, handcuffed by a late Thanksgiving and a downturn in consumer confidence, saw revenues slacken as the year began to wane.
Yet not all was lost. Even with gains of only about 2 percent in holiday store sales, Americans can hardly be accused of pulling in their horns.
For one thing, they created another stampede at car dealerships, where year-end sales accelerated into the fast lane amid yet another blitz of incentives.
That brings us to Tuesday’s government report of December retail sales. Chicago economist Brian Wesbury is looking for a solid gain of 1.2 percent, thanks to the boost from soaring auto sales. Without autos, sales would be up about 0.3 percent.
“Detroit rode to the rescue again last month, as Americans rushed out to take advantage of special deals on cars and light trucks,” said Wesbury, of Griffin, Kubik, Stephens & Thompson, an investment firm.
Even without car sales, however, he said holiday activity was far from a disaster. In fact, he describes 2002 as “a miracle year” for the economy.
He explained: “Think about all of the negatives Americans dealt with, including terrorism, war in Afghanistan and Iraq, corporate malfeasance, soaring costs for insurance and health care, higher fuel prices and a weak stock market.”
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Taken together, he said, the depressing list of events could have devastated the economy, “except for the fact that consumers remained extremely resilient. They bought cars and houses at record rates, and they kept on buying other items, too. They have brought us into 2003 in very good shape, all things considered.”
TRADE GAP
Dollar off 15%
The shaky status of the dollar against world currencies–the greenback is near a three-year low against the euro–gets little help from this country’s huge trade deficit. Watch for Friday’s report on the shortfall for November to show a modest widening, to $35.9 billion from $35.1 billion a month earlier.
Analysts said the dollar’s swoon, if it doesn’t abate soon, could hit Americans’ pocketbooks. The U.S. currency has dropped by about 15 percent against foreign currencies, meaning prices for cars, electronics and clothing could rise soon.
The dollar’s decline also could put a crimp on those planning to travel overseas; a trip to Europe could cost about 20 percent more than last year.
PRODUCER PRICES
Edging higher
With the dollar in a crunch, analysts expect little further talk about deflation. In fact, most are calling for a rise in Wednesday’s report of the December producer price index and Thursday’s consumer price index.
Economist Richard DeKaser says year-over-year gains in consumer prices have averaged 2.5 percent since 1993. “While the past year shows a lower than average 2.0 percent gain, that’s hardly a breakout to the downside,” said DeKaser, of National City Corp. in Cleveland.
EQUITIES
January gains key
Investors in the stock market are watching the calendar closely in a belief that price progress in January will point to prosperity for the year. At this point, the three major indexes have gained at least 5 percent.
Chicago investment manager Marshall Front says a major issue for Wall Street is a need “for businesses to invest, in order to overcome obsolescences and inadequate additions to corporations’ capital stock.”