ACE Report: Northeast Ohio posts another modest jobs gain

The Northeast Ohio workforce gained 682 paychecks in February. A small number, but in a jobs picture on a roller coaster, any gain is better than the alternative.

The latest Ahola Crain’s Employment (ACE) Report projects that private-sector employment in the Cleveland-Akron metropolitan region’s private sector grew to 1,164,001 jobs in February from 1,163,319 in January on a seasonally adjusted basis, an increase of 0.06%.

The economy of the seven-county metro area seems to be settling into a new normal of year-to-year slow job growth with month-to-month ups and downs, even when seasonal fluctuations are smoothed out. Over the last 12 months, employment is up 1,433 jobs, a slight 0.12% gain since February 2015, when the region employed 1,162,568 people.

Employment peaked in July at 1,167,490, then slid for four months to 1,161,984 before recovering.

“The estimated job growth indicates a modest pace of business activity,” reports economist Jack Kleinhenz, who devised the ACE model. “The world economies were not well behaved in the early months of 2016, impacting the outlook for the U.S. and probably creating some drag on the regional economy.”

The metro area growth lags slightly the growth in state employment.

According to the Ohio Department of Jobs and Family Services, employment statewide grew by 53,000 jobs, a 0.98% gain from 5,344,000 in February 2015 to 5,397,000 in February 2016.

Manufacturing has been sluggish, stemming from slower growth overseas and the stronger U.S. dollar, Kleinhenz said, though he believes that gains in consumer spending, income, employment and housing prices will counter the manufacturing slowdown.

“Consumer spending is off on a strong start this year,” said Kleinhenz, who is the chief economist for the National Retail Federation, a major retail trade association. “Housing should get the benefit of a better labor market and growing incomes. The early Easter should also pull spending into the first quarter.”

The Federal Reserve Board’s March Beige Book, the Fed’s eight-times-a-year assessment of economic conditions across the country, concurs with the ACE characterization. It lumps its Cleveland-based Fourth District — which includes Ohio, Western Pennsylvania and Eastern Kentucky — among the majority of the Fed’s 12 districts that are reporting “modest” growth in the labor market.

The Fed noted reports from the Fourth District that low-skilled jobs were becoming increasingly difficult to fill.

The ACE Report is based on payroll data from about 3,000 predominantly small and midsize employers that is gathered by The Ahola Corp., a Brecksville payroll and human capital management firm and on other economic indicators, including construction data and retail sales.

ACE Report February

Month Non-Farm  Small (1-49)   Mid-Sized (50+) Goods-producing Service Producing
September(Actual) 1,164,804   473,914   690,890 215,278 949,526
Oct(est) 1,163,125   473,123   690,002 216,507 946,618
Nov(est.) 1,161,984   472,760   689,224 214,844 947,140
Dec(est) 1,164,239   473,693   690,546 215,039 949,201
Jan(est) 1,163,319   473,318   690,000 214,876 948,443
Feb(est) 1,164,001   473,686   690,314 213,703 950,298
Recent Month’s Estimated Change
Jan ’16 to Feb ’16 682   367.95   314 (1,172) 1,854
Diff from Feb 2015 1,433   888   544 (4,114) 5,547
Trend
3-month 1,163,853   473,566   690,287 214,539 949,314
6-month 1,163,579   473,416   690,163 215,041 948,538

By

March 25, 2016

You’re spending more on shirts and sweaters

Sorry, shoppers.

After two years of declining apparel prices, the latest batch of government reports shows consumers are finally spending more on T-shirts and sweaters.

According to the Consumer Price Index released Wednesday, the apparel index in February posted its largest increase in seven years, rising 1.6 percent. It was the second straight month of higher apparel prices, after they ticked up 0.6 percent in January.

Prior to January, apparel prices had fallen for four straight months.

This inflection signals that retailers’ efforts to trim their inventories — and as a result, drive more full-price selling — are starting to take hold. But it’s still too early to call victory.

“I think it’s probably more of an indication of a comparison issue,” Perkins said. “We had a lot of clearance merchandise obviously in January, and coming into February you finally see some more full-price selling.”

Discounts were particularly prevalent during December and January, as unseasonably warm weather left retailers with a glut of coats and jackets.

But over the past few months, retailers from Express to Jos. A. Bank have taken steps to reduce shoppers’ reliance on steep discounts. They’ve done so with varying success.

While a more thoughtful promotional strategy and better management of its merchandise helped Express beat Wall Street’s comparable sales and earnings estimates, Jos. A Bank’s comparable sales plunged 32 percent during the fourth quarter. Revenues at the retailer, which was acquired by Men’s Wearhouse in 2014, have taken a beating since it did away with its famous Buy One Get Three Free promotions.

Woman shopping

Hill Street Studios | Getty Images

Jack Kleinhenz, chief economist for the National Retail Federation, said he is hopeful that February’s results are a sign that retailers are starting to see some “stickiness” on prices. But he also expressed concern that they received a boost from favorable weather, or that the number could receive a downward revision next month.

“I’m pleased to see [the data] to a certain extent, but I’ve also go to look at it with squinted eyes,” he said. “We need to see some notable changes on more than just one month.”

Though Perkins was skeptical that apparel prices would continue their recent ascent, he said the steep declines the category experienced last year are unlikely to continue. Instead, he predicts clothing prices will stay stable, particularly if consumers respond favorably to the new spring product.

Paired with Tuesday’s retail sales data, which showed that revenues at clothing stores were up 3.2 percent during the first two months of the year, Perkins said there are “burgeoning signs” that that apparel could be bouncing back.

Still, he cautioned that retailers are facing numerous headwinds, including the growth of fast-fashion and off-price retailers, wage pressures and necessary investments into digital shopping.

“Apparel has a chance to rebound here,” he said. “It really has been neglected over the past several years.”

Wall St. sees rate hike in June: CNBC Fed Survey

Wall Street sees the Federal Reserve and its interest rate hike as down, but decidedly not out.

Ninety-five percent of the 42 respondents to the CNBC Fed Survey predict no rate hike at the March meeting, which begins Tuesday. A decision comes on Wednesday followed by a news conference from Fed Chair.

But nearly all the economists, fund managers and strategists believe that the U.S. central bank’s next move will be to raise interest rates and, on average, believe that next hike will come in June. In fact, 83 percent say the Fed’s next hike could come in June or even earlier, with a small minority saying April or May.

“Since the last FOMC meeting, U.S. GDP tracking estimates have moved up, the unemployment rate has ticked down, core inflation has firmed, the US dollar has sold off, and broader financial conditions have eased modestly,” wrote Neil Dutta, head of economics at Renaissance Macro Research, in response to the survey.

Respondents to Fed survey are also more optimistic on stocks. The S&P 500 (^GSPC) is forecast to end about 3 percent higher this year and 9 percent higher by the end of 2017. Those forecasts had come down sharply during the recent market sell-off.

On average, respondents see the Fed hiking twice this year, two fewer hikes than the median forecast of members of the rate-setting Federal Open Market Committee. That number will likely come down after the Fed releases on Tuesday a new set of FOMC projections, the first of the new year.

Jack Kleinhenz of Kleinhenz & Associates sees the better economic data, but still believes the Fed “will remain in a holding pattern until some of the world worries have been reduced.”

Respondents to Fed survey are also more optimistic on stocks. The S&P 500 (^GSPC) is forecast to end about 3 percent higher this year and 9 percent higher by the end of 2017. Those forecasts had come down sharply during the recent market sell-off.

Yet, while forecasts for the 10-year yield(U.S.:US10Y) came down with the sell-off, they have not rebounded. Treasury yields are seen rising from their current levels but the forecast remains muted. The yield, currently at 1.96 percent, is seen rising to just 2.34 percent by the end of the year, about 20 basis points less than had been forecast in the January survey. The yield in 2017 is projected to increase to 2.83 percent, about on par with the prior survey.

Interestingly, the outlook for inflation has worsened, though it still remains low. This year, the consumer price index is forecast to rise to 2.14 percent, about the same as in January, but in 2017, inflation is seen going up to 2.41 percent, about 10 basis points worse than the prior survey.

“Rising core inflation and falling unemployment should have a data-dependent Fed raising rates next week. It is unlikely to. Communications are a mess,” said John Ryding, chief economist at RDQ Economics.

The risk of the U.S. entering recession has come down to 24 percent from its recent high of 29 percent in January. Global economic weakness is seen as the biggest threat to the economic recovery, while tax and regulatory policies are second. GDP is expected to remain around 2 percent for this year and next.

And there are also political worries. “Beyond global economic weakness we worry political rhetoric and the outcome of the presidential election could negatively impact the market, as investors never like uncertainty,” said John Roberts, director of research at Hilliard Lyons. “Political polarization is certainly not positive for the equity markets.”

The CNBC survey was conducted March 10 and 11.

CNBC

Where is China heading and how exposed is the U.S. economy?

The turbulence in Chinese markets continues to fray many nerves globally, and rightly so as China is the world’s second-largest economy. The Chinese growth engine is sputtering and not helping to pull along growth for the rest of the world. The catalyst for the financial market turmoil that started early this year was China’s plunging stock market, caused by its questionable financial policies. Markets experienced a similar episode last summer. While this appears scary and a major slump would be profound, it is important to understand the cause of the slowdown in the Chinese economy and the need to put it into perspective relative to the U.S. economy.

The Chinese philosopher Lao Tzu wrote that “A journey of a thousand miles begins with a single step.” The Chinese government is attempting to re-engineer its economy to rely less on investment spending and transition itself away from manufacturing and heavy industry toward more internal consumption. This is no surprise, as the strategy had already been long communicated when I visited policymakers in Beijing in 2007. This transition has meant cutting the double-digit pace of Chinese economic activity nearly in half. The former pace of growth was dependent on capital spending required to build factories, rail networks and roads — significant expenditures and far larger than spending focused on consumer-driven needs for household consumption. Making this pivot for an economy that steers more like an ocean liner than a speed boat is a difficult thing to achieve. Other reforms were needed, including moving from a command-and-control model toward a market-based economy including developing their debt and equity capital markets. The transition is a process that will take many decades and the deceleration will be drawn out with fits and starts.

MONTHLY ECONOMIC REVIEW: VOLATILITY TO FADE IN 2016

Economic factors from deflationary prices and weather conditions to reduced foreign tourism and shifting consumer preferences came together in 2015 to create an interesting and challenging environment for retailers. Looking at the year ahead, NRF Chief Economist Jack Kleinhenz believes the economy remains on solid footing and the probability of a major slowdown is relatively low. Download the January 2016 report.

The recent volatility in the Chinese stock markets and elsewhere reflects the challenges in rebalancing the economy. There have been setbacks and consequently there are heightened concerns about the current strength of the economy to withstand these changes. Equally important is whether central government authorities are able to manage and navigate China’s currency markets and equity markets in this new environment. In my view, the government has the financial resources and flexibility to respond its challenges and will attempt to steer the ship to safety.

The direct effects and the exposure of the U.S. economy to China are rather limited. This is quite evident by looking at trade ties as the United States imports nearly four times the amount of goods from China as it exports to China. The value of U.S. exports to China are less than 1 percent of U.S. gross domestic product. On the other hand, the value of imports from China are worth about 10 to 12 percent of all goods consumed by U.S. households.

Of course, financial linkages of U.S. companies and banks need to be considered in the event of a collapse associated with the loss of U.S. exports to China and U.S. investments there. While these risks should not be minimized, these finances are not very extensive. Looking forward I do not currently believe that Chinese economic activity will entirely collapse into recession. It is not hyperbole to state that the U.S. consumer is keeping China and the world economy afloat. As long as the world’s largest economy driven by consumer spending remains on solid footing, it will provide ballast for China to navigate the choppy waters of transition.

– See more at: https://nrf.com/news/where-is-china-heading-and-how-exposed-is-the-us-economy#sthash.ny24db5m.dpuf

Recession Not on the Horizon, Economists Agree

“Is the U.S. economy going into a recession?” asked economist Lisa Emsbo-Mattingly, repeating the leadoff question at the first “Crain’s Economic Outlook” event at the InterContinental Hotel in Cleveland on Wednesday, Feb. 2.

“No,” she said. “But the dynamics of the economy are changing.”

As the session progressed, Emsbo-Mattingly, director of research and global asset allocation at Fidelity Investments of Boston, and Jack Kleinhenz, chief economist for the National Retail Federation and principal of Kleinhenz & Associates of Cleveland Heights, elaborated on that theme, telling the audience of 125 economists and business leaders that different industries and different levels of the global economy — international, nationwide and regional — do not move in lockstep and that all of those pieces are continuously moving up and down.

Proving the point, she added that, despite her positive sense of the broad U.S. economy, “Manufacturing essentially is in a recession.”

A frequent, up-close observer of the Chinese economy, Emsbo-Mattingly said what happens there will have an impact throughout the world.

Closer to home, Kleinhenz added that he sees “not stellar growth, but good growth,” for the Northeast Ohio economy in 2016.

And Kleinhenz took a little shine off any rosy outlook by pointing out that the economy is in its seventh year of expansion and, “Most expansions don’t die of old age.”

The discussion turned to the outlook for personal investment and how investors should be allocating their assets for the year ahead.

“That’s a tough question to answer,” said Emsbo-Mattingly, who is currently president of the National Association of Business Economics. “It’s an extremely volatile market. A big factor in that is the slowing growth of the Chinese economy.”

Politics was on the mind of one questioner, who asked about how the results of this year’s presidential election might affect the economy. Both economists agreed that the economy won’t strengthen or weaken based on who wins.

“I don’t think whoever wins will make a difference,” Kleinhenz said.

By

Economists Say Retail Sales for 2016 Will Grow Slowly

Sea-change in Consumer Behavior: Retailers Need to Catch Up

By David Moin

January 13, 2016

It’s a new year and fashion retailers are in deep analysis.

After getting pounded by warm weather, stock market gyrations, diminishing tourism, consumer lethargy and furiously discounting to clear excess inventories, they’re fretting over the impact on fourth-quarter margins. Sales numbers may tally up at expected modest levels or under in some cases, but profits could be a sadder story that comes to light when quarterly results are reported next month.

It’s unanimous that holiday 2015 was tough and served as a wake-up call for how to approach the future and how to compel fickle consumers to buy apparel again. There’s no question that after a difficult year, retailers will make serious adjustments that include the re-examination store fleets, technology initiatives, real estate holdings, product offerings, inventory levels and head-counts.

Here, in broad strokes, key industry figures give recommendations on how to think about the future, cope with the accelerating pace of change, and reshape the business model for better results.

Terry Lundgren, chairman and chief executive officer, Macy’s Inc.: “Department stores must be a place for customers to come and get away from the everyday challenges of their lives, and to be entertained when they shop.”

Stephen M. Ross, chairman and majority owner, The Related Companies: “All retail has hit a wall. Retail is probably the greatest form of entertainment. It has to be a place where people feel they are being entertained. So much buying is done online today, so you go [brick-and-mortar] shopping as a form of entertainment. If you can’t do that well, you are not going to succeed. We are going to have a lot fewer malls. ‘B’ and ‘C’ malls have got to be wondering what’s the alternative use. At places like Hudson Yards or Time Warner Center [both Related developments] we do very well and compete very well with online.”

David Jaffe, ceo, Ascena Retail Group: “For retail, agility is an increasingly important competency. Agility enables a company to create the right product, the optimal inventory levels, and create a customer journey that leverages the convergence between all channels.”

Jerry Storch, ceo of Hudson’s Bay Co.: “It’s important not to confuse transient factors with ongoing long-term trends. The weather, tourism, the strength of the dollar, the weakness in the oil sector — those will all change. Many are confusing those short-term factors with long-term sea changes like the ascendance of the Internet, which is the most important change. That is why we have embraced the Internet and have made the Gilt Groupe acquisition. It reinforces our all-channel presence.”

Britt Beemer, chairman and ceo, America’s Research Group: “The biggest lesson that jumped out to me is something consumers have been saying for the last 10 years, that there is nothing really new to shop for. ‘Nothing new’ has clearly affected retailers. Staff reductions are biting these mall retailers in the butt. Consumers can’t find anyone to ring up their purchases. Nobody realizes how time-short Americans are. Women are complaining that the stores don’t make the effort to put things back in the right order, in the right sizes. That’s career women saying that. Their time is precious.”

Steven B. Tanger, president and ceo, Tanger Factory Outlet Centers Inc.: “The fact remains that consumers still have the weight of the economy on their minds, evidenced by the complex retail spending environment we saw over the holiday season and expect to see in 2016. Looking forward, we will continue to remain focused on delivering a best-in-class collection of brands and designers in friendly and innovative shopping center environments that make shopping for deals enjoyable for our customers. Traffic was strong throughout 2015 at our centers nationwide.”

Walter Loeb, retail analyst: “The 2015 holiday season made the major shifts in consumer buying patterns very clear. Consumers don’t want to own as much. The rise of Internet shopping and growth of off-price retailing are megatrends. Retailers who want to survive will have to respond by restructuring. Retailers have to close stores and reduce the number of senior executives that run organizations. It’s time to cut back. It’s a question of creating a more efficient operation like TJX Cos. has. Near-term sales weakness in apparel and general merchandise is adding to the pressure. Young customers are prioritizing the purchase of new technology over other goods, and the unseasonably warm weather has left many winter coats, boots and sweaters on retailers’ shelves awaiting even deeper markdowns. I believe that many retailers did not anticipate the change in buying patterns and the negative momentum it would bring to their stores. They did not see the rapid shift to online shopping, which often occurs in the middle of the night when customers have ample leisure time. Nor did they see how the demand for new technology would cause a shift away from ready-to-wear apparel. I am worried about the future profitability of many leading retailers. They are now on the defensive against the leading Internet and off-price retailers such as Amazon and TJX.”

Karen Murray, president of VF Sportswear Coalition: “It’s become more than just about running a business or being creative. It used to be easy. You would put products in a store and sell them. Now it’s about innovation, strategy, business development, and really understanding where your business is and where it is going. You have to deal with so much more — the in-store [display], online, fast fashion, technology, all of these things.”

Jack Kleinhenz, chief economist, National Retail Federation: “Last year was puzzling. We won’t be able to write the story until we really see how the dust settles. Consumers are in a good position financially but they are conservative. The Great Recession has impacted people. There’s been a spending shift to services over and above goods. Retailers are going to have look very closely at inventory expectations going forward, how far in advance they need to get inventory and shortening the supply chain in some cases. But that is going to cost something. In some ways, retailers will have to integrate services in their stores, make it a place to shop for a shirt but also where you can get a haircut. They are in an unenviable area, on the front line of the economy.

Lou Amendola, chief merchandising officer, Brooks Brothers: “I don’t think brick-and-mortar will go away, but we’ll have to re-engineer the model. That may be scary for some, but every few years the industry has to change. There’s a new reality among consumers. They only buy when they need something. If they don’t need something, they wait. The new year will bring an adjustment to how we react to this changing environment.”

Kevin McLaughlin, cofounder and creative director, J. McLaughlin: “People are looking for experiences, rather than just a product. People want to learn how to kayak or travel. Those things are competing for the retail dollar.”

Tom Schoenwaelder, chief commercial officer at Doblin, the innovation and design arm of Deloitte LLP: “The retail industry has a propensity to jump on bugaboo bandwagons or issues, like building innovation labs, and lose sight of the bigger picture — improving their core operations and figuring out what they actually are and plan to be for the customers and how to build really unique experience for their customers. They should learn how to integrate and innovate in a multifaceted way. When we studied innovation patterns, we have found companies and industries that focus on unilateral innovation — a single product or channel — end up innovating in ways much easier for competitors to replicate. If you innovate on a broader basis, in a multi-faceted way, you create systems that are much harder to emulate by competitors. Ikea set up a really innovative system 75 years ago — flat-packing the furniture, home assembly, to bring costs [and prices] down. There is actually a good level of quality in their price points. They become anchors in locations not [initially] popular among retailers and ultimately they bring other retailers to the area. They do put the customer through some hardship, forcing you to snake through the showrooms before picking up the purchases and then you’ve got to assemble the stuff at home. But Ikea basically offers things that the customer really wants, and is savvy enough to say we don’t have to be everything to everyone.”

Lynne Coté, ceo of Cabi: “Retailers can sell tons of skirts and sweaters, but if they are not incorporating a relationship and service-based experience that makes their customers’ lives better, then they are just selling ‘stuff,’ and anyone can sell ‘stuff.’ People long for human connection in every area of their lives. Why would retail be any different?”

Thomas McGee, president and ceo, International Council of Shopping Centers: “The big piece of advice I give is, listen to the consumer. What’s really becoming increasingly important to the consumer is experience. They want more experiential offerings. You see the growth of restaurants, entertainment and services. I also say embrace and understand technology, make sure to integrate technology in the shopping experience. I actually think it was a strong shopping season. All of the information from our member surveys indicate a strong holiday. Certainly, there has been a lot of press around the growth of online. It’s a little bit overblown. The reality is as a percentage of total retail sales, it’s not a huge part. It’s has been generally flat at 6 to 8 percent of total retail. It’s not a story of bricks versus clicks. The more interesting is bricks and clicks.”

Rick J. Caruso, founder and ceo, Caruso Affiliated: “The year 2016 will be marked by opening first-to-market retail stores, flagship tenants and launching exclusive pop-up shops across our retail portfolio including The Grove and The Americana at Brand. In addition, we will continue to work alongside our retailers to surpass consumer expectations by adding and enhancing amenities and services such as delivery, in-store pickup, social media interaction and customer service. The ability to create more time for our guests through this service offering will only increase our value.”

Faith Hope Consolo, chairman of The Retail Group of Douglas Elliman Real Estate: “It’s all about instant gratification. It’s about having it now. Same-day deliveries. With online competing with brick-and-mortar, consumers want it to be in their hands before they even finish the order. Same-day delivery is the big push. So are givebacks. Money cards. It’s not just points anymore. Or friends and family. Retailers are giving cash certificates and immediate discounts when you check out. It’s all about the here and now. We are in this ‘need it now’ lifestyle. Everybody is in a big rush. It’s not about personalization. It’s about gratification.”

ACE Report: Northeast Ohio Has First Job Drop Since July

Employment in the seven-county Cleveland-Akron metropolitan area is being projected to dip ever-so-slightly in November. The estimated decline — 1,400 jobs or 0.1% of the employment in an economy of nearly 1.2 million jobs — reflects an annual slowdown in the manufacturing, or goods-producing, sector, according to the latest Ahola Crain’s Employment (ACE) Report.

The decline is the first drop since July and reflects an estimated increase of 834 jobs in service employment that is offset by a loss of 2,233 jobs in goods-related businesses.

Year-over-year, though, employment is up, according to the ACE numbers, with a modest gain of 5,427 since November 2014, a 0.58% seasonally adjusted increase.

“The region in recent history registers softer employment gains for the goods-related sector, typically in the later months of the year, and we are not overly concerned about the contractionary reading (for November) as the region remains in expansion territory,” said economist Jack Kleinhenz, who compiles the ACE data.

“The recent trend of performance is indicating further economic activity and job growth, but perhaps at a slower pace,” Kleinhenz said.

The regional economy continues to lag the national economy. Private employment nationally rose by 2.1% over the last 12 months, according to current employment data compiled by the federal Bureau of Labor Statistics.

The two sub-metro areas in the region are performing similarly, though Cleveland is doing narrowly better than the Akron metropolitan area.

Estimates by the Ohio Department of Jobs and Family Services (ODJFS), which analyzes the BLS data, found that the number of people employed grew by 0.018% over the last year in its Akron metro area, which includes Portage and Summit counties. Employment in the five-county Cleveland metro grew 0.019% from November 2014 to November 2015. The ACE estimates cover only private sector employment; the BLS data include all non-farm employment, including the government workforce.

Similarly, unemployment for the Cleveland metro was 3.7%, according to ODJFS, down from 5% in November 2104, while the two-county Akron metro had an unemployment rate of 4.6%, down from 5.3% a year ago.

Regional employment is expected to continue to grow, though slowly. Economists at PNC Financial Services Group, parent of PNC Bank, found optimism in October when the company surveyed small and middle market business owners in Ohio.

Because of optimism about the outlook for their own businesses and for the local economy, 19% of business owners surveyed said they planned to hire in the months ahead, compared with only 10% who had plans to hire six months earlier.

In addition, 36% of those employers — PNC did not disclose the size of its sample — said they expected to increase employees’ pay, up from 26% who were planning pay raises in the spring. Of those planning raises, 59% said they planned to give raises of 3% or more during the next six months.

Seasonally Adjusted Data

Month Non-Farm Small (1-49) Mid-Sized (50+) Goods-producing Service Producing
June (actual) 1,161,467 472,360 689,108 217,477 943,991
July (est.) 1,159,789 471,691 688,097 216,957 942,831
Aug (est.) 1,161,200 472,304 688,896 216,667 944,533
Sept (est.) 1,162,105 472,702 689,403 216,408 945,697
Oct (est) 1,164,808 473,822 690,986 216,617 948,190
Nov (est) 1,163,408 473,390 690,018 214,384 949,024
Recent Month’s Estimated Change
Oct ’15 to Nov ’15 (1,400) (431.7) (968) (2,233) 834
Diff from Nov 2014 5,427 2,430 2,997 (2,174) 7,601
Trend
3-Month 1,163,440 473,305 690,136 215,803 947,637
6-Month 1,162,129 472,712 689,418 216,418 945,711

Crain’s Cleveland Business

Consumers Win as Retailers Cut Holiday Prices

Retail sales for November — excluding automobiles, gasoline and restaurants — were up 0.5 percent over October and 3 percent from a year ago. That’s a welcome increase, but less impressive than what we had expected. While we have been comfortable with our estimate of the direction of sales, the November numbers mean we are going to be watching the next two weeks — including this weekend’s Super Saturday — very closely.

So what’s happening?

A closer look at the numbers reveals that while fewer dollars are coming in than expected, that doesn’t mean consumers are shopping less. In fact, unit volume appears to be up. The issue is that prices are down. And that means the same number of sweaters, toys or electronic gadgets sold brings retailers less revenue.

The Bureau of Economic Analysis’ price index shows that general retail prices were 2.9 percent lower in October than a year earlier. A number of factors are behind the lower prices — inventories are stable but elevated, in part due to the flood of merchandise that came into the country earlier this year after the labor dispute that brought West Coast ports to a crawl ended. Warm weather has reduced demand for seasonal items like coats and sweaters. Much of the extra money freed up by lower gasoline prices has gone to services such as travel and restaurants rather than retail merchandise. In addition, most consumers have seen little in the way of wage increases. Rent, health care costs and even the amount spent on communications like smartphones, tablets and broadband Internet service are all up.

More than anything, perhaps, is that consumers have become conditioned to expect discounts and promotions. As the TV commercial says “nobody pays retail anymore.”

All of this has combined to create a very deflationary atmosphere the past year or more, meaning retailers have needed to be competitive and drop prices to keep products moving off the shelves.

While prices may be down, demand is certainly up. November sales were generally solid, with strength seen in sales of electronics, food and beverage, clothing, sporting goods, general merchandise and on-line and other non-store sales. Weakness in furniture and building materials was seen, but both had been strong in October.

“Lower prices might be bad news for retailers. But they are good news for retailers’ customers, who are getting great values for the prices they pay.”
NRF Chief Economist Jack Kleinhenz

Economist Richard Curtin, who compiles consumer sentiment data for the University of Michigan, stated recently that overall buying attitudes were solid due to the lower prices. He noted that purchases of durable goods were at the highest level since 2006. He says consumers are willing to spend but, as has been the case since the end of the recession, they will continue to dig for discounts and sales.

What’s the bottom line? Lower prices might be bad news for retailers. But they are good news for retailers’ customers, who are getting great values for the prices they pay. And, in the long term, what’s good for consumers is good for retail.

Jack Kleinhenz

December 15, 2015

National Retail Federation

Design Industry Business Conditions Remain On Solid Footing

Washington, D.C. (November 18, 2015) | The American Society of Interior Designers (ASID) released the third quarter Interior Design Billings Index (IDBI) on November 16, 2015. Billings by design firms ticked up slightly in September compared to June’s IDBI score of 57.1. The ASID indices are centered on 50 percent; above 50 indicates expansion and below 50, contraction. Based on the IDBI three-month moving average, billings have been in positive territory since the third quarter of 2011, and September’s score indicates positive revenue growth.

In addition, the September new product inquiry index score of 62.8 is up from the June score of 58.3 and has shown a series of steady positive scores since late 2011.

Business conditions vary by market specialization
Design firms specializing in single-family residential projects report growth during the second and third quarters of 2015, posting IDBI scores of 57.5 and 55.8 respectively. Through all of the second and most of the third quarters, with the exception of September, IDBI scores for retail, entertainment, office, and hospitality remained between 50 and 65. Meanwhile, the institutional sector billings continued to be erratic.

Construction spending continues rebound
Total new construction spending is approximately 13.7 percent above its August 2014 level. During the fourth quarter of 2015 it is anticipated that residential improvement spending will increase to $106.8 billion for the quarter, a year-over-year increase of 13.5 percent from the fourth quarter of 2014.

Six month outlook – stronger business conditions expected
While the six-month business conditions index score of 66 for September is down from the June score of 74, the consistency of these scores (above 50) in positive territory suggest ongoing continued expansion for the design industry.

“Overall economic growth has slowed due to economic crosscurrents during the third quarter, but consumer spending, along with long-awaited housing and construction activity, are providing needed fuel to keep the economy on track,” said Jack Kleinhenz, ASID economist. “The slightly slower U.S. economy should prove to be temporary and not prove to be a major speed bump for the design industry, and panelists remain positive about the near term outlook for the industry.”

Download the full third quarter ASID Interior Design Billings Index Report.

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About the ASID Interior Design Billings Index
The IDBI is produced by ASID Research, under the leadership of ASID Vice President of Research and Knowledge Management David Krantz in partnership with Jack Kleinhenz, Ph.D., and Russ Smith, Ph.D., both of Kleinhenz & Associates. The index, which was begun in November 2010, is a diffusion index compiled from a monthly ASID survey of 300 geographically diverse firms that primarily offer interior design services or offer interior design services as part of architectural, engineering, and other related practices. Resulting perspectives on current and future business conditions for the interior design industry are helpful indicators of changes in the direction of economic activity. The ASID indices are centered on 50 percent (above 50 indicates expansion and below 50 contraction).

About ASID Research
ASID Research provides the design industry with regular data, studies, and reports offering insight and analysis on the state of the industry and practice. Established to educate the design industry on the status of its health and the impact of design on the way we work, live and play, ASID Research offers quantitative and qualitative knowledge of the industry. Our goal is to provide observations, vision, and compilations that inspire and inform. Outcomes include the monthly ASID Interior Design Billings Index (IDBI), the ASID Industry Outlook report, third-party collaborations, and educational grants.

About ASID
The American Society of Interior Designers believes that design transforms lives. ASID serves the full range of the interior design profession and practice through the Society’s programs, networks, and advocacy. We thrive on the strength of cross-functional and interdisciplinary relationships among designers of all specialties, including workplace, healthcare, retail and hospitality, education, institutional, and residential. We lead interior designers in shared conversations around topics that matter: from evidence-based and human-centric design to social responsibility, well-being, and sustainability. We showcase the impact of design on the human experience and the value interior designers provide.

Published year:  https://www.asid.org/content/design-industry-business-conditions-remain-solid-footing#.VlSRx3arRD8
2015