The second shoe has dropped, and yes, we are in a recession.
The decline in GDP was only 0.9% after a 1.6% decline in the first quarter, meeting the standard definition of a recession, even though a few politicians said it wouldn’t happen. Truthfully, this is old news to most retailers that have watched as the visitors have declined all year.
So what?
1. We are now in the eighth month of this recession, even though we just met the definition. Post-WW II recessions have averaged just under 12 months with most being nine months.
Our economy is both seasonal and cyclical. We were overdue a cyclical downturn, and most seasons have an uptick in the second half of the year. In furniture, we sell 55% in the second half of the year because consumers move into their next residence in the summer and decorate soon afterwards.
2. Our economy is healing after some massive blows earlier.
Inflation has been declining slowly, gas prices are down, our horrid logistical nightmare is somewhat better, and I sense our consumers’ anxiety over war, interest rates and employment has already peaked this summer.
3. We still face the global uncertainties and the dreaded mid-term elections, with all their usual name-calling and misrepresentations of the truth. But now that the recession has been confirmed, we expect corrective measures will be introduced.
With mortgage rates doubling this year, we will be seeing more alternatives to traditional 30-year mortgages, such as adjustable rates, balloon payments or other options.
Yes, we should see improvement later this year after this dismal summer, BUT only if you aggressively promote to attract your customers. The days of just opening the doors and sales piling up are not returning soon. Sorry.
See also: Of interest rates, GDP and what investors will do | Jerry Epperson
W.W. “Jerry” Epperson, Jr. is a founder and managing director of Mann, Armistead & Epperson, Ltd., an investment banking and research firm. Jerry is the head of their research efforts and has in excess of thirty years of experience in the publication of hard/soft dollar research which focuses on demographics, consumer products, furnishings (residential and contract) and related issues. More specifically, Jerry’s research in the furnishings industry is recognized on a world-wide basis for its in-depth coverage of suppliers, manufacturers and retailers.�