CSA Exclusive: ICSC Chief Economist Forecasts Second Half Turnaround
Following a holiday sales decline of 2.3%, the worst performance on record, the chief economist with the International Council of Shopping Centers on Thursday forecast a turnaround in the economy during the second half of this year.
“Certainly there is a lot of pessimism about 2009, but we think that 2009 will be a transition year toward stronger activity,” Michael P. Niemira, VP, chief economist and director of research, ICSC, said during a telephone conference call. “It may be modest, but we do expect an improvement.”
Niemira noted that retail sales declined 3.8% during the second half of 2008 and 5% for the year. “The trend will continue down in the first half of 2009, but in the second half of the year, we project a 2.7% rise in retail sales, despite a continuing drag from both the automotive sales and discretionary spending,” he said.
Those numbers include all retail. Niemira also looked at retail sales in shopping centers and noted a 0.3% increase during the second half of 2008. “We look for a rise of about 1% during the first six months of 2009, followed by 3.5% growth in the second half of the year,” he said.
What does this mean to the shopping center industry? First, it means that store closings and rising shopping center vacancy rates will continue for a while. Niemira said that about 136,000 stores closed during 2008. He projects 150,000 closings in 2009.
While that sounds bad, it is well below the high established in 1998 when 161,000 stores closed.
At the same time, Niemira said, 110,000 to 115,000 stores opened in 2008, and another 105,000 to 110,000 will likely open this year.
With store closings out numbering store openings, some shopping centers will end up closing. Niemira estimated that perhaps 2% or 2,000 of the nation’s 100,000 shopping centers might not survive the recession.
Still, he expects the gloom to begin to lift in the late spring or early summer. In support of his contention, he cited a projected rise in home sales beginning around mid-year. He noted that while consumer spending plunged in 2008, real average weekly earnings, a key leading indicators for retail sales, made a huge turnaround. Niemira also expects to see results from government stimulus spending around mid-year.
The return of bank lending, a leveling off of declines in auto and furniture sales and an increase in business inventories will signal the beginning of the turnaround.
Finally, Niemira pointed out that particularly sharp and deep economic recessions are typically followed by powerful rebounds.