Consumer spending, which typically drives around two-thirds of economic activity, rose by only 3.5% in February, according to data recently released by the U.S. Department of Commerce, but that low level of consumption hasn’t bruised the confidence of major clothing and accessories suppliers.
Capital Business Credit (CBC) surveyed roughly 30 retail importers and manufacturers, responsible for around $800 million in goods at retail outlets throughout the country, and found that 75 percent expect spring and summer sales to significantly outpace the gross domestic product (GDP).
Furthermore, nearly half (45.5%) said the next two seasons will be stronger than last year, while 38.6% believe they will remain more or less the same. Of those respondents expecting a pick-up in sales, three-quarters project a growth of 4 percent or more.
“While retail sales for January and February were lower than initially anticipated, this hasn’t seemed to deter retail suppliers’ confidence or business activity,” Andrew Tananbaum, executive chairman of CBC, said in a statement released Wednesday. “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, nearly half (49.1%) stated they have increased; one-third of those respondents indicated a rise of between 7 and 10 percent, while 28.8% said that orders grew by more than 10 percent.
Notably, half of those surveyed said they had considered increasing their Chinese production due to the strong U.S. dollar and the devalued yuan and 37 percent believe that margins may increase due to the lower cost to make goods in China. But 56.7% don’t think it will translate into lower consumer prices and 71 percent said the strong dollar will impact foreign spending stateside.
“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.”
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