Retail Execs See Stronger Near-Term Outlook, But Long-Term Outlook Sinks…

Retail Executives participating in the monthly survey conducted by the National Retail Federation appeared to echo the stronger-than-expected retail sales results for month, but they have also apparently lost faith in the continued resilience of the consumer.

According to the most recent NRF Executive Opinion Survey, a monthly index by the National Retail Federation, the Retail Sector Performance Index (RSPI) for August declined 1.6 points from the July reading, but was up 520 basis points from August last year. The RSPI measures retail executives' evaluations of a number of key metrics and is based on a scale of 0.0 – 100.0 with 50.0 equaling normal.

Customer traffic was up again for the month, posting an average index of 50.0 points, an increase of 12.5 points from August 2004. The traffic increase led to higher sales (56.3) for the period and average transaction per customer (59.4) was up 3.1 points to the highest point since May 2005 (64.3). The employment picture was flat to July, and the inventory index also picked up for the month after a decline in July for the June period.

The bad news is that the executives surveyed took a more pessimistic view of the long-term upside for the retail business. The Demand Outlook, which measures the respondent’s six-month look-ahead view, declined 9.4 points from the July reading, the first decline since the March 2005 reading, and the lowest Demand Outlook reading since August of last year.

Perhaps even more troubling is that the executives surveyed lost even more faith in the ability to keep prices up in the current climate, a reading that usually indicates an atmosphere of increased promotional activity. The reading was the lowest response since February 2004.