Suppliers Expect Retail Sales to Continue Propping Up the Overall Economy
NEW YORK – U.S. economic growth has long been dependent upon consumer spending. If the major suppliers (of mostly soft goods such as clothing and accessories) to retail outlets are a bellwether of the economy, then the coming months are looking to provide a much needed jolt as 75 percent of these suppliers expect retail sales to significantly outpace the gross domestic product for the spring and summer shopping season, according to a new survey conducted by Capital Business Credit (CBC).
According to the Global Retail Manufacturers and Importers Survey, the vast majority of those surveyed believe that 2016 will either be better than or the same as 2015 – 45.5 percent believe that the spring/summer seasons will be stronger than last year and 38.6 percent believe it will remain the same. How much stronger? Three quarters (75 percent) believe that retail sales will grow by 4 percent or more, outpacing core GDP growth.
“While retail sales for January and February were lower than initially anticipated, this hasn’t seemed to deter retail suppliers’ confidence or business activity,” said Andrew Tananbaum, executive chairman of CBC. “In fact, nearly 90 percent of importers and suppliers are reporting reorders for the spring/summer shopping season. Retailers have become increasingly reticent to stock shelves if they do not believe products will sell or consumers will buy. These reorders mean that the major retail chains and individual stores are optimistic.”
When it comes to orders that retailers are placing, the majority stated they have increased or stayed the same (78 percent). Approximately half (49.1percent) indicated that they have increased. Of those that stated orders have increased, one third indicated that orders increased between seven and ten percent, while 28.8 percent said that orders increased by more than 10 percent.
When it comes to economic factors that are keeping these domestic importers up at night, one third cited equity market volatility and 40 percent stated concern related to China’s growth.
The Impact of the Chinese Yuan Given that so many U.S. retail goods are produced in China, the devaluation of the yuan has been an important factor for importers and retailers to increase profitability while keeping prices low. In fact, half of respondents are considering increasing their Chinese production due to the strong dollar vs. the yuan. A third (37 percent) believe that margins may increase due to the lower cost to produce goods in China, however the majority (56.7 percent) do not think this will translate into lower consumer prices.
On the flip side, 71 percent believe that the strong U.S. dollar will impact foreign spending domestically.
“While the overall recovery from the great recession of 2008 has been sluggish, the low costs of goods produced in China has allowed the U.S. consumer to stretch their spending dollars and allowed retailers to keep costs down,” Tananbaum concluded. “In our opinion, this is the first time since the recession that manufacturers, importers and other participants in the retail goods supply chain will have the opportunity to recover some of the margins they lost over the past decade.”
Methodology CBC surveyed approximately 30 retail importers and manufacturers that supply approximately $800 million in goods at retail outlets throughout the United States. These wholesalers sell to all segments of the retail supply chain with the exception of the juniors market.
About Capital Business Credit
Established in 1988, Capital Business Credit LLC is a global financial products and services company. The Company’s solutions include: full-service factoring; accounts receivable management services; inventory lending; asset-based lending; and international financing. CBC Trade Finance, a division of CBC, provides trade finance solutions for U.S.-based importers working with Asia-based suppliers (exporters). Capital Business Credit is based in New York, with offices in Hong Kong; Shanghai, Los Angeles; Charlotte, NC; and Ft. Lauderdale, Fla.
Capital Business Credit is now known as White Oak Commercial Finance.