Research - APRIL 26, 2017

U.S. consumer confidence dips in April, retailer bankruptcies increase

by Andrea Waitrovich

U.S. consumer confidence slipped in April, according to the Consumer Confidence Survey conducted by The Conference Board by Nielsen.

The Conference Board Consumer Confidence Index was at 124.9 in March, which was the highest reading in 16 years, and dropped in 120.3 in April. The Expectations Index decreased monthly from 112.3 to 106.7 in April.

Those saying business conditions are good decreased from 32.4 percent in March to 30.2 percent in April and those saying business conditions are bad increased slightly from 13.1 percent to 13.8 percent. Those who said jobs are plentiful decreased from 31.8 percent to 30.8 percent during the month, while those who claimed jobs are hard to find remained unchanged at 19.1 percent.

Consumers were also less optimistic about the short-term outlook as those who are expecting business conditions to improve over the next six months decreased from 26.9 percent to 24.8 percent in April and those expecting business conditions to worsen rose from 8.5 percent to 10.9 percent.

Americans who said they are expecting more jobs in the months ahead decreased from 23.8 percent in March to 23.0 percent, while those anticipating fewer jobs increased from 12.7 percent to 13.1 percent. Consumers who expect their incomes to increase dropped from 22.5 percent to 19.3 percent and those who are expecting a decrease held steady at 7.5 percent.

Despite the decline, the index concludes consumers will remain confident that the economy will continue to expand in the months ahead. More than 14 percent of respondents said they planned to buy a car in the next six months — the most since July 2012.

The Commerce Department reported earlier this month that Americans pulled back on their spending at retailers in March on top of a February drop.

According the United States Census Bureau, U.S. retail sales fell 0.20 percent in March 2017, which was below market expectations of a 0.10 percent rise.

And more and more retailers are going bankrupt. IREN reported several bankruptcies in March. Approximately 14 chains have announced they will seek court protection, according to an analysis by S&P Global Market Intelligence, almost surpassing all of 2016. In 2016, there were 18 filings. The highest recent total was 42 in 2010.

About 2,880 store closings have been announced so far this year, compared with 1,153 in 2016.

It is becoming known as the Amazon effect.

Department stores, electronics retail, and apparel shops are at highest risk, according to S&P. Companies that are at risk of bankruptcy filers, include Sears Holdings Corp. DGSE Companies Inc. Appliance Recycling Centers of America Inc. and Bon-Ton Stores Inc.

And the food and home improvement segments are safest.

S&P also noted as stores empty and real-estate vacancies increase putting pressure on REITs and commercial real-estate developers. The United is currently home to more 1,100 shopping malls and it is expected to be cut in half over the next decade, according to a Chicago Tribune.

Retailers and landowners have to rebrand themselves and create an experience for its consumers at brick-and-mortar stores. Retail landlords have added restaurants, movie theaters, carnivals, events and activity centers for children to create experience-driven offerings. Many malls are also adding rotating stores around for only a short time - known as pop-up shops.

For example, Simon Property is hosting a first carnival in its Round Rock Premium Outlets parking lot, about 20 miles north of Austin, Texas. Similar events are being held for the first time at locations such as Central Mall in Port Arthur, Texas, managed by Jones Lang LaSalle Inc., and a Cheyenne, Wyoming, mall owned by CBL & Associates Properties Inc., according to a Bloomberg article.

The U.S. retail real estate market saw a decline in the sector overall during 2016, totaling $64.3 billion in investment sales, according to JLL. However, U.S. retail occupancy fundamentals remain strong, with vacancy decreasing by an average f 26 basis points across major markets and demand exceeding supply over the last four quarters of 201.



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