Report: Stimulus Doesn’t Help Enough11 Feb, 2009 By: Erik Gruenwedel
The National Retail Federation Feb. 11 told Congress, hours before the Senate and the House approved a $789 billion stimulus package, that the economic legislation wouldn’t do enough to provide a jumpstart to bring shoppers back into stores.
Instead the retail trade association said legislation aimed at increased home ownership tax credits coupled with a series of national sales tax holidays (shopping days where no sales tax would be applied to purchases) would promote speedier consumer consumption.
“The increased sales resulting from these holidays would provide a direct infusion of liquidity into the economy estimated at $20 billion, benefiting consumers and cash-starved states, and would preserve and create significant numbers of jobs through interrelated sectors of the economy including the retail, manufacturing and transportation industries,” said Steve Pfister, SVP for government relations at the NRF.
The group estimates the proposed tax holidays could save consumers nearly $20 billion, or almost $175 for the average family, based on the $236 billion in sales tax collected nationwide each year. It said retailers have reported sales increases of 35%-to-40% from previous state-level tax holidays.
The economic stimulus legislation comes as the retail industry is facing one of its most difficult years on record. The NRF predicted retail sales would drop 2.5% during the first half of 2009 and end the year down 0.5% from 2008, which closed 7.9% down from 2007.
This would be the first year-to-year drop since the trade group began forecasting results in 1995. In addition, the retail industry lost 579,000 jobs in 2008 and is continuing to see job losses this year.
The NRF based its prediction on the cargo volume of retail products arriving from overseas (imports) at major U.S. ports, which is expected to drop 11.8% during the first six months of 2009, indicative of a worsening domestic economic landscape.
Volume for the first six months of 2009 is forecast at 6.6 million 20-foot-equivalent units (TEU), compared to 7.5 million TEU during the same period in 2008. A TEU is one 20-foot container or its equivalent.
Final data for 2008 showed cargo volume for the year at 15.2 million TEU, compared with 16.5 million TEU in 2007, a decline of 7.9% and the lowest total since 2004, when 14 million TEU moved through the ports.
“Unfortunately, cargo volume at the ports reflects retailers’ anticipated sales, and [we] expect that sales will get worse before they get better,” said Jonathan Gold, VP for supply chain and customs policy at the NRF. “Retailers are only going to import what they can sell.”
The U.S. imported more than $1.9 trillion in goods from foreign countries (spearheaded by China) in 2007, according to the U.S. Department of Commerce.