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THE MORNING BUZZ: Economic Indicators

20 Aug, 2002 By: Holly J. Wagner

Economists and politicians are divided on whether we are headed for a double-dip recession or will turn around by fall. Some speculate it's going to be a weak holiday season for retail, others believe consumers have plenty of disposable income and will unleash spending power.

For our industry, one indicator to watch is the electronics stores. Best Buy revised down twice for the quarter on low sales and other chains are turning in similar results. That could mean fewer DVD players getting into homes, or at least getting there at a slower pace. But even that could go either way: many people may be feeling the pinch right now and holding off on buying the player until the holidays bring sale prices and make it a family gift.

At the risk of getting branded an armchair economist, I have a few little points I watch as barometers of the economy in the real America, where most of us live.

Fast Food: I've noticed that fast food chains are among the first businesses to respond to recessionary times and the last to boost prices when the economy seems to improve. Just last year a variety of cheap deals evaporated in response to rosy economic projections. But they started to return just a couple of months ago and now you can get two burgers or tacos for 99 cents just about anywhere in town.

Fast food restaurants know they fall into a budget dining category and will lose cost-sensitive customers when times get tight unless they keep giving them a reason to come in. The lines are decidedly shorter at McDonald's this week since the chain lifted the 39-cent cheeseburger promotion, which I predict it will return shortly.

Wal-Mart: Wal-Mart sales were up 26 percent for July. That's a whopping bump even for a well known discounter with a respectable-sized garden center to bring in summer customers.

Wal-Mart does a great job of building community. The discounter features sales associates and their families in print ads. It has an entire TV campaign built around senior citizen greeters and families who shop together. The message? We're all in this together.

That sentiment is connecting with Americans who have lost jobs or investments or who fear what the future holds; and that sense of community will keep bringing those folks into Wal-Mart, where we're on a budget and proud of it.

eBay: As both of my loyal readers know, I have been selling stuff I no longer need on eBay since early this year. In the spring, folks were still uneasy about the recession and my items were getting lots of bids. Then things started to look better and, when the general mood was more optimistic, bidding slowed down. Now, with the threat of a double-dip recession looming, my items are trading briskly again.

I think when people feel like money isn't a problem, they just run out and buy new stuff. When uncertainty looms, they tighten the purse strings and cruise eBay for the same item, used.

So those are my amateur economic indicators and all of them say double-dip. I hope the holiday season is a huge success for all of us, but from the way things look now, I'd make sure I had a Plan B.

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