Recovery or Rhetoric?


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After dealing with months of deepening recession, pet specialty retailers may be getting a glimpse of light at the end of the tunnel. In late May and early June, stories about a steep climb in consumer confidence were all over the news, with many media outlets speculating that this could portend the economic recovery for which we’ve all been waiting.

Many of these news reports revolved around private research group The Conference Board’s Consumer Confidence Index, which had reached its highest levels in eight months. According to the Board’s widely cited report, the good news was twofold: While the “present situation” portion of the index reflected modest gains in consumer confidence, the “Expectations Index” (which measures consumers’ outlook over the next six months) rose significantly.

The results, said Lynn Franco, director of the Conference Board Consumer Research Center, were an indication that, “The worst is now behind us.”

Ms. Franco is not the first person to declare that the worst of our economic troubles were in the rearview mirror. In the weeks before the release of the Consumer Confidence Index, a number of pundits–including Nobel prize-winning economist Paul Krugman and U.S. Treasury Secretary Timothy Geithner– were heralding an impending economic recovery. Yet even with all of these positive signs, one must wonder whether we’re looking at a true recovery or simply more rhetoric. 

Many of the expert claims about recovery amount to little more than speculation; and even the Consumer Confidence Index relies heavily on supposition. For example, the Index, which was basically a survey of 5,000 representative U.S. households, reported that the percentage of consumers expecting more job creation over the next six months rose from 14.2 percent to 20 percent, while the percentage of consumers expecting a decline in employment declined from 32.5 percent to 25.2 percent. What’s more, 10.2 percent of the respondents reported that they expected an increase in their income (up from 8.3 percent).

While the stock market saw a marked positive response to the results of the Consumer Confidence Index, if I were a retailer, I would be hesitant to go out on a limb and base any major business decisions on economic guesswork by the average Joe. After all, even the acknowledged experts don’t all agree. For every Paul Krugman who says that recovery is around the corner, there’s a Warren Buffett saying that this economic turmoil is likely to extend well beyond 2009.

When deciding whom to believe, it’s important to remember that there isn’t much room for error. If it’s Buffett, not Average Joe, who is correct, then retailers that are banking on a swift recovery may just find that the light at the end of the tunnel is a freight train bearing down on them.

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