A Womens wear article on how Depressed consumers affect their personal spending.

1. ORVANA ACCESSORIES
August 2, 2011
Depressed Consumers Send Stocks Sliding
By EVAN CLARK
FROM:
WWD Issue 08/03/2011
Consumers are more pessimistic, and even the wealthy are cutting back on spending, surveys
show.
Photo By Beth A. Keiser/Corbis
Washington skirted catastrophe, reaching a last-minute debt deal and avoiding a U.S.
default Tuesday, but retail stocks had their worst day in more than a year and the Dow
Jones Industrial Average fell below 12,000 as investors worried anew that consumer
strength is wavering — even in the world of luxe.
Personal consumption expenditures fell unexpectedly in June, retreating 0.2 percent
from the prior month. It was the broad measure of consumer spending’s first decline
in a year and, together with higher savings rates and indications of a slowdown in the
bulwark luxury sector, painted a sobering picture for the fashion industry.

2. The S&P Retail Index fell 3.8 percent, or 20.05 points, to 513.89 Tuesday as the Dow
Jones Industrial Average lost 2.2 percent, or 265.87 points, to close at 11,866.62.
Gold prices shot up to a new high of $1,664.20 an ounce as investors sought safety.
The retail decliners covered chains across the price spectrum, including Tiffany &
Co., down 8.2 percent to $73.38; Nordstrom Inc., 5.8 percent to $47.05; Guess Inc.,
4.6 percent to $36.11, and Target Corp., 4.2 percent to $48.95.
It could have been a much better day. President Obama signed into law a deal to
raise the nation’s debt ceiling, averting a potential U.S. default that would likely have
caused chaos in the markets. But Wall Street took no time to celebrate and zeroed in
on the state of the economy, two-thirds of which is comprised of consumer spending.
There are signs even the well-heeled consumer is pulling back as the economy
continues to sputter.
Unity Marketing’s Luxury Consumption Index, a quarterly read on how affluent
shoppers are feeling, plunged to 66 in the second quarter from 82.8 in the first
quarter — the steepest drop since the first quarter of 2008, when the financial crisis
was just beginning.
“It’s a forward looking index, but the last time it did this we went into a very bad
place,” said Pam Danziger, president of Unity Marketing. “I’m concerned we may be
going back to a similar bad place — almost 70 percent of our sample say that the
recession is not over.”
The group conducts its survey every three months and last month polled 1,272
consumers with average annual income of $301,800 and a median net wealth of
$856,000. Those surveyed cut spending in the second quarter by 8.4 percent
compared with the first quarter and 18.4 percent from a year earlier.
“These are people who are primarily working,” Danziger said. “They are in jobs of
corporate responsibility. These are people who are in tune with what’s going on in
the world today and they’re the ones who are feeling a lack of confidence.”
Last week, French retail-to-luxury group PPR said its sales growth slowed to 5.4
percent in the second quarter from 9.1 percent from the first quarter. And LVMH
Moët Hennessy Louis Vuitton, which posted first-quarter revenue growth of 17
percent, saw trends moderate, leading the luxury conglomerate to 13 percent sales
growth for the whole first half.

3. Broader measures of consumer sentiment also have been wavering. The Thomson
Reuters-University of Michigan Surveys of Consumers showed that confidence fell in
July to its lowest level since early 2009.
So far, apparel sales have held their own and many chains are expected to report
stronger comparable-store sales results for July. (See related story, this page).
Spending on apparel and footwear ran at an annual rate of $348 billion in the second
quarter, up from $344.5 billion in the first, according to last week’s GDP report,
which also showed the economy grew slower than expected.
A Commerce Department report Tuesday showed that June personal consumption
expenditures fell 0.2 percent from May, an unpleasant surprise for economists who
projected a 0.2 percent rise. Private wages fell by $2.2 billion in June following an
increase of $15 billion in May.
Consumers are not just making less at work, they’re socking more away into their
rainy-day funds, boosting the personal savings rate to 5.4 percent of their disposable
personal income in June, up from 5 percent in May.
“Consumer mood is at depressed levels and those households that are not living
paycheck-to-paycheck are saving more,” said Chris Christopher Jr., senior principal
economist at IHS Global Insight. “This is considerably worrisome, since we are a
consumer-oriented economy.”
Mark Montagna, an analyst at Avondale Partners, focusing on the value retailers,
said stronger July sales could belie weakness ahead, particularly given air
conditioning use during the recent heat wave. “When those utility bills for July hit,
people have to pay for that,” he said. “That’s probably going to crimp some people’s
wallets because the bill is going to be a lot higher than people hoped. Things have
gotten a lot tighter for the consumer.”
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