Chicago-area retail sales plunge $5.8 billion, or 11.5%, in first half of '09 -Outlook for holiday shopping looks bleak to analysts

Chicago-area retail sales plunge $5.8 billion, or 11.5%, in first half of '09 -Outlook for holiday shopping looks bleak to analysts
By Sandra M. Jones
Copyright © 2009, Chicago Tribune
September 18, 2009
http://www.chicagotribune.com/news/chi-fri-notebook-shopping-withdrsep18,0,5320410.story


Everyone seems to think we're coming out of the recession, but a report due Monday suggests the much-ballyhooed recovery is still far away.

Chicagoans put the brakes on shopping in the first half of the year, cutting back more dramatically than in previous recessions and signaling a bleak holiday shopping season ahead, according to the report from Chicago-based Melaniphy & Associates Inc.

Retail sales in the metropolitan Chicago area fell a record $5.8 billion, or 11.5 percent, to $44.8 billion in the first six months of 2009 from the same period a year ago, said the report, based on recently released sales tax data from the Illinois Department of Revenue. The decline ranks as the biggest percentage decrease in local retail sales in at least two decades.

Among the most stunning revelations: The $5.8 billion in lost local sales from January through June 2009 exceeded the $5.1 billion drop in Chicago-area sales for all of 2008, at the time a record, said John Melaniphy, who has been collecting Illinois retail sales data for the past 20 years. The pace of the sales decline accelerated in the second quarter of 2009, suggesting that the retail climate is getting worse, not better, he said.

"I tried to find something optimistic in these numbers and I can't," said Melaniphy, founder of the namesake consulting firm. "The pundits are talking about how we hit the bottom and now we're coming out of it. I don't see it."

On Tuesday, Federal Reserve Chairman Ben Bernanke said the recession was "very likely over," at least from a "technical perspective." But the economy is going to feel "very weak" for some time, he added. In the past, consumer spending, which typically accounts for 70 percent of the economy, has helped America climb out of recessions.

There are signs of a rebound in the manufacturing and housing markets, but the unemployment rate hit a 26-year high of 9.7 percent in August -- a troubling sign for retailers. Consumers spend less when they are out of a job or are concerned they could lose their job.

A separate report released Thursday echoed Melaniphy's findings.

Three out of four families are trying to cut back on household spending, according to a consumer behavior survey released Thursday from America's Research Group and UBS Global Equity Research. The average amount that American consumers are cutting out of their monthly spending is $191.11, the survey said, the highest figure in the 13 years that the survey has been conducted.

The results, based on a survey of 1,001 telephone interviews the week of Sept. 7, led America's Research Group CEO Britt Beemer to predict that this holiday shopping season will be a "retail train wreck."

"The data foretells a very scary Christmas shopping season with consumers radically cutting back at a time when retailers need shoppers to shore up sagging retail sales," Beemer said.

The Chicago-area shopping environment fared worse than the nation as whole, a reflection in part of the region's higher unemployment rate. The Illinois unemployment rate stood at 10.4 percent in July. August figures are due Friday.

Retail sales nationwide fell an unadjusted 9.8 percent for the first six months of the year from the same period in 2008, according to the Commerce Department.

Illinois is one of the few states that releases retail sales tax data, which allow analysts to get a true snapshot of consumer spending. The national figures, in contrast, are based on estimates.

The city of Chicago held up better than the broader metropolitan area, helped in part by a smaller decline in grocery sales, according to Melaniphy. Retail sales in the city fell $1.0 billion, or 9.2 percent, in the first half of 2009 to $10.0 billion.

Overall, the biggest sales declines in the city and the suburbs combined occurred at furniture and electronics stores (down 22 percent), automotive and gas stations (down 19 percent), home improvement stores (down 13 percent) and apparel stores (down 12 percent).

smjones@tribune.com