Retailers Say War Will Slow But Not Stall U.S. Consumer Spending

As the war in Iraq rages, U.S. shoppers are cautious but haven’t stopped buying, according to a retail executive opinion survey conducted between March 14 and March 20 by the National Retail Federation and Bank of Tokyo-Mitsubishi Ltd. The survey, part of a monthly series, shows major indicators such as store traffic and inventories remaining steady in March. The NRF’s retail sector performance index (RSPI) stays unchanged from February at 42.9%. The RSPI measures retail executives’ evaluations of, among other things, monthly sales, customer traffic, employment, and inventories; the scale runs from zero to 100%, with 50% equaling normal.

“We expect consumers will remain cautious with their spending and will probably put off purchasing big-ticket items until there is more certainty in the economy,” says Michael Niemira, senior retail analyst at Bank of Tokyo-Mitsubishi. “Much of this will depend on the length of the war and how quickly it takes for the economy to recover.”

In another report released on April 1, the NRF predicts that the war in Iraq could slow U.S. retail sales growth from a projected 5.8% to 3.8% this year. The NRF forecasts sales to increase 2% in the first quarter and 2.5% in the second. Assuming that the Iraq conflict is resolved quickly, however, retail sales growth should accelerate in the second half of the year, reaching 4.7% and 5.3% in the third and fourth quarters.