The latest NRF-BTM Executive Opinion Survey, a monthly index by the National Retail Federation (NRF) and the Bank of Tokyo-Mitsubishi Ltd. (BTM), shows the retail industry continued to gain momentum in October. The Retail Sector Performance Index (RSPI) for October 2003 was 57.9 percent compared to a revised 54.6 percent in the previous month and 20.3 percentage points above the same period a year ago. The October reading was the highest since the survey began in September 2002. (The RSPI measures retail executives’ evaluations of monthly sales, customer traffic, the average transaction per customer, employment, inventories and a six-month-ahead sales outlook expectation. The RSPI is based on a scale of 0% – 100% with 50% equaling normal.)   

“With each passing month, this survey shows that the health of the industry is becoming more of a certainty as retail executives continue to express more confidence in the state of their business,” said Michael Niemira, Senior Retail Analyst, Bank of Tokyo-Mitsubishi, Ltd. “We are now starting to see growth in retail employment as retailers begin to hire for the holiday season.”

The Operations Index (average of employment and inventories) stood at 52.3 percent in October from a revised 46.4 percent in the previous month. The index stood 11.7 percentage points above the same period in 2002.

For October, the Current Demand Index (average of sales and traffic) rose at a faster pace (57.3%) compared to September (56.5%-revised) and was 24.0 percentage points higher year-over-year.

Looking ahead six months, retailers were considerably optimistic about business conditions. The October Demand Outlook Index (a six-month outlook for sales) stood at a very strong 64.1 percent, 4.1 percentage points higher than last month and 25.3 percentage points above the same period last year. The October reading was just slightly below its all-time high in August 2003 (65.8%).

The Pricing Index (measure of industry’s discounting or pricing power) remained low in October (28.1%). Although considerably above the previous month (17.9%), the index still reflects a considerable lack of pricing power by retailers. The Pricing Index for October 2002 was 23.8 percent.

“Each month we see very strong indicators that the economy is making a comeback,” said NRF President and CEO Tracy Mullin. “Retailers can expect reasonably healthy holiday sales as consumers are returning to the stores and ready to spend.”

In a special question, retail executives were asked to assess the state of advertising budgets for the industry this year relative to the same time last year.  While 44.0 percent saw little change from the prior year, another 44.0 percent felt ad budgets were planned higher or much higher.  A minority (13.0%) felt ad budgets were lower.