Consumers Open Wallets, Defying Predictions of Slow Economy
After the slowest holiday shopping season in a decade, Americans seem to have cautiously reopened their wallets in the early weeks of 2001, spending more than either executives or analysts had predicted, according to a story by David Leonhard in the Jan. 24 edition of The New York Times.
General Motors revealed that its January sales were unexpectedly strong, and DaimlerChrysler has canceled plans to shut two plants temporarily this month, citing consumer demand.
The mildly encouraging consumer data suggests that despite some dire predictions, the economy has not entered a free fall. The numbers also add weight to the argument — still being made by a majority of economists — that the United States is more likely than not to avoid a recession this year.
Analysts caution that the January data covers a short period of time during the least busy shopping month of the year. The perked-up sales figures could reflect the weather as much as anything else, as a series of storms in December kept people at home and caused them to delay some purchases, analysts said.
Even if consumer spending — responsible for about two-thirds of the economy — continues to recover from its late 2000 malaise, risks of a recession remain. And the Organization of the Petroleum Exporting Countries (OPEC) announced a cut in production last week in an effort to raise prices.
But most Americans remain optimistic about the economy, even if they are no longer as giddy as they were in 1999 and 2000. In mid-January, 67 percent of people surveyed by the Gallup Poll described economic conditions as excellent or good, down from 74 percent in August, but still higher than at any point between 1992 and 1998.
More people think the economy is getting worse than see it as improving, but 63 percent of Americans expect to be better off a year from now than they are today, according to the poll.
Economists said the Federal Reserve's surprise cut in interest rates on Jan. 3, the stock market rally that followed, the still-low unemployment rate and even the end of the uncertainty over the presidential election could all be making people less worried than a few weeks ago.
Frank A. Ursomarso, the president of Union Park Automotive, which owns seven dealerships in Wilmington, Del., told the Times that lower interest rates had made his cars less expensive in recent weeks. Ursomarso said he can charge less because his own floorplan payments on unsold cars have fallen slightly, and customers' finance payments are now smaller than they were.
During the first two weeks of 2001, Union Park sold 121 vehicles, up from 105 during the corresponding period of last year. In November and December, by contrast, fewer people were walking into Union Park's showrooms to look at Hondas, Fords and BMW's, and sales dropped 4 percent — or by 21 vehicles — compared with the previous year.
The widespread discounts being offered by the Big Three carmakers are also keeping sales from falling further than they did at the end of last year, according to Ben Hollingsworth, the chairman of Group 1 Automotive, which owns 55 dealerships in the South and in Massachusetts. Many buyers can choose among making no down payment, delaying monthly payments or getting a rebate of $1,000 to $3,000, according to Hollingsworth.
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