Retailers, consumers and prices
Lessons from the 2001 recession
It’s a plan similar to the once the government followed in 2001, except at that point, the economy was already in a recession.
Back then, the National Bureau of Economic Research said the U.S. economy entered a recession in March 2001. To get the economy out of its funk, the government passed a stimulus package and mailed out rebate checks over a ten-week period from late July to the end of September 2001, according to research conducted by Thomson Reuters.
When looking at the monthly year-over-year changes, U.S. retail sales started slumping in the beginning of 2001 and reached their lowest level in September 2001, according to the research report. The Thomson Reuters Same Store Sales Index registered a rise of just 0.8 percent in September 2001, but then began to bounce back once the rebate checks were mailed out, with October notching a 1.6 percent gain.
“When comparing the sectors within our retail universe, we find that the discount sector performed the best during the 2001 recession and remained within the 3 percent - 6 percent growth range,” the Thomson Reuters report states. “It registered its strongest same store sales result ever of 9.5 percent in February 2002.”
The report said similar trends are being repeated now as middle class consumers cut back on spending and head to discount stores.
“In 2001, Wal-Mart beat Target’s same store sales results 11 out of 12 months. Today, we’re witnessing a similar trend as Wal-Mart has smashed Target’s comps over the last six months,” the report stated.
During the 2001 economic slowdown, the apparel sector performed the worst and posted its weakest comp ever of -9.5 percent in September 2001, the research shows. It also said the teen apparel group and department stores underperformed and posted sluggish comps during the period leading up to September 2001, but were able to bounce back shortly after.
“If past behavior is a good indicator of future behavior, we are likely to continue to see an increase in consumer spending in the short-term while the 2008 rebate checks are distributed,” the report states. “This in return could help improve the overall economy since consumer spending accounts for about 2/3 of GDP. The discount group is expected to post a 3.1 percent comp, but analysts continue to look for an even stronger 3.5 percent result excluding Wal-Mart.”