Taking Stock: Consumer Confidence… Service Sector Slows

CONSUMER CONFIDENCE SHAKY: Americans have renewed fears about jobs and the economic recovery, as consumer confidence collapsed in June after having risen for three consecutive months. The Conference Board, a private research group based in New York, said its latest Consumer Confidence Index dropped almost 10 points, to 52.9 from a revised 62.7 in May. That stunned economists surveyed by Thomson Reuters, who had expected the reading to dip slightly to 62.8 points from the 63.3 points that was reported before last month’s revision, and retailers are now concerned about consumer spending in the months ahead. Analysts also had predicted June sales to be strong as the month was bolstered by the Memorial Day and Fourth of July holidays. Instead, traffic during the five-week period sagged. “We believe price cuts and sales did not drive purchases, as consumers, reeling from continued weak employment and the falling stock market, remained on the sidelines,” said Eric Beder, analyst at Brean Murray, Carret & Co. The June Consumer Confidence Index reading was the biggest drop since February, when the index fell 10 points.


RETAIL NYC LAND GRAB: The retail real estate market in New York saw some heat in the second quarter, according to a recent report from Cushman & Wakefield. Some high-profile signings in prime shopping areas led to a city-wide decline in vacancy rates, including in the Madison Avenue submarket, where availability dropped to 10 percent, compared with 12.8 percent in the first quarter. “Retailers are in a managed expansion mode, and with many owners offering attractive pricing, many retailers have found this to be the right time to make commitments,” said Joseph Harbert, COO of the New York metro region for Cushman & Wakefield. “With numerous deals in the pipeline, we expect to see activity continue into the second half of this year, leading to additional declines in availability.” Though vacancies in Manhattan’s upper Fifth Avenue submarket remained unchanged in the most recent quarter, it was the recipient of the largest retail lease in the city’s history. Japanese fast-fashion retailer Uniqlo inked a 90,000-sq.-ft. lease at 666 Fifth Avenue. According to Harbert, rental rates around the city remain favorable for retailers. In fact, he estimated, they are off by about 30 percent from their peak, even though they increased slightly in the second quarter. On Madison Avenue, average rents for ground floor space were $831 per square foot at mid-year 2010, up 0.4 percent from the first quarter. Along upper Fifth Avenue, from 49th Street to 60th Street, rents rose 3.2 percent to $2,100 per square foot.


SERVICE SECTOR STUNG: A weaker-than-expected report on non-manufacturing economic activity last Tuesday continued to beat down the already-battered U.S. stock market. The Institute for Supply Management’s index of non-manufacturing activity, based on a survey of U.S. purchasing managers, indicated that service-related businesses grew for the sixth month in a row, but at a slower pace than the previous month. The index fell to 53.8 — numbers over 50 indicate growth — from 55.4 in May. According to the U.S. Labor Department, service-sector businesses added 91,000 jobs in June, but the ISM report said employment contracted, indicating more jobs were cut than added. The survey also reported that inventories are still deemed too high. Renewed fears that the economic recovery may now be losing steam sent a majority of retail stocks down in Tuesday’s trading. The Dow Jones Industrial Average finished up a modest 0.6 percent, at 9743.62, on Tuesday, a better showing than the prior week, when stocks fell sharply on the back of disappointing jobs and housing data. Stocks of 54 publicly listed retail companies tracked by Footwear News fell an average of 2.6 percent that day. But for the week tracked, they were slightly up, an average of 0.08 percent.

— M.T.

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