Mark Zandi, the chief economist at Moody’s Analytics, didn’t mince his words on the future outlook for the retail industry.
“Prospects are pretty bleak over the next few years for brick and mortar,” said Zandi at an Urban Land Institute (ULI) breakfast event in Midtown last week.
But the retail market hasn’t seen anything yet — the real shakeup will be the next great recession, which according to Zandi, will occur in June 2020.
Noting that the sector is cyclical, Zandi said economic models back up his predictions. Historical trends of a super-hot economy,
wage and price pressures and a Federal Reserve increase in interest rates are all indicators of recession, he noted. Until then, he said, consumers will continue to spend and, if current wage growth continues, help keep the economy moving.
“The stronger wage growth I anticipate is the key reason for optimism about the economy for the next few years,” said Zandi. “Stronger wage growth is the fodder for continued consumer spending. The American consumer drives the train, it drives the U.S. economy. As long as the American consumer is in the game and doing what it needs to do, we’re good.”
Zandi argued that the retail market isn’t as bad as it could be, despite struggles the industry is having with the surge of e-commerce and changing consumer shopping habits. Over the last year, there have been 450 retail bankruptcies, noted the economist.
“What would the world look like for brick and mortar retailers if the American consumer wasn’t out there spending as strongly as they are?” said Zandi.
The recent stability in the global economy is one of the reasons to be optimistic about retail, and the American economy in general, according to Zandi.
While the global economy has been struggling for the ten years since the Great Recession, at the moment, things are looking up.
“It’s the first time since the recession that there isn’t a single major economy on the planet that isn’t growing,” said Zandi. While he admitted there are a couple countries “getting their footing” like Brazil and Russia, in the grand scheme of things, the global economy is strong.
“Combine a solid global economy with a stable to lower dollar, that’s a pretty good mix,” said Zandi. “Through the rest of the decade, I think we’re in pretty good shape. It would be pretty hard to screw it up.”
Another bright spot for retail is the approaching holiday season, a time when the industry is expecting a typical rise in sales, but with more of those sales coming through e-commerce. According to a CBRE report released on Nov. 10, e-commerce is predicted to account for 11.5 percent of all retail sales in the November-December period.