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3 Reasons April Retail Sales Were Soft

05/13/2011

Retail sales rose in April at the smallest rate in nine months. Wait a second…isn’t the “Great Recession” over? Not so fast!

Consumers are timid. And with good reason.

Here are 3 very real reasons April’s numbers are soft.

  1. Real Estate Worries – More than 28 percent of U.S. homeowners with mortgages owed more than their properties were worth in the first quarter as values fell the most since 2008, according to Zillow on Monday. Homeowners with negative equity increased from 22 percent to 28 percent.
  2. Fuel Price Worries – Soaring gas prices have caused three in 10 consumers to reduce their discretionary spending, according to this month’s RBC Consumer Outlook Index. With the current average price per gallon of gas at $4.00 nationally, another 41 percent said they would reduce spending when gas prices climbed above $4.50 per gallon and one in five said their pain threshold was $5 per gallon or more. See my post on this subject from March 31st.
  3. Retailers Aren’t Innovating – Nearly all retailers, with the exception of the Apple store, J Crew and a precious few others, have only discounts and sales to drive traffic. New products, styles, levels of performance, design – all pretty much missing in action.
April’s results come after an encouraging March. To me, this points out how fragile the economy really is and how uncertainty is overshadowing consumers on multiple levels. Worse still, there’s no end in sight.
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