Swampscott researcher says consumer confidence remains shaky

SWAMPSCOTT – Consumer confidence in the state’s economy has plummeted deeper than was reported six months ago, when the Massachusetts Consumer Confidence Index reached its lowest point since 1991.
The gloomy picture was supported by a new state report showing that job loss has continued unabated for 10 consecutive months. News that Fidelity Investments plans to lay off 1,300 employees, many of them in the Boston area, added to the overall sense that the economy is staggering.
Ken Perkins, founder of Swampscott-based Retail Metrics Inc., an independent equity research firm, said consumers are “trading down” among retailers as they seek bargains.
As Perkins explained, department stores across the board, including those already selling at a discount like J.C. Penney and TJMaxx, as well as higher-end stores such as Macy’s, are having difficulty as shoppers turn to warehouse retailers for lower prices.
“Clearly these stores are feeling the pinch,” said Perkins, noting that many consumers no longer have discretionary income due to record-breaking gasoline prices, the high cost of heating fuels, the depreciation of their home values and general inflation. “They’re going to BJs and Costco these days.”
According to Perkins, consumers have been squeezed especially hard since the Lehman Brothers bankruptcy. “The Lehman debacle created all sorts of problems. The economy had been slowly deteriorating and that only accelerated the process,” he said. “It has been a primary issue for a lot of people, coupled with their concerns about job loss. The employment report for October showed 240,000 jobs down. And more disconcerting was the indication of a downward spiral from August and September, so that you have 10 consecutive months of job loss.”
Rising food prices are also causing low-income families pain at the supermarket, while homeowners over the past three years have witnessed the steady decline of their home values.
“It doesn’t leave a lot for us to be confident about,” Perkins said. “Discretionary income is just about non-existent for most consumers right now and it’s going to be rough sledding through the first half of 2009.”
Perkins said tourism could also find itself hard hit, opining that the ski industry will likely need to find incentives to lure consumers to the mountain resorts. “I think a lot of people are already saying we won’t be skiing as much this year, and that will hurt the hotel industry. It goes along with everything else. If it’s not a necessity, then people may skip it.”
Evidence of an economic downturn can also be found in restaurant industry data, which suggests more consumers are dining at home, ordering takeout, or eating at fast-food establishments rather than spending at quality restaurants.
Specialty clothing retailers like The Limited and Chico’s are also experiencing the lack of consumer spending, Perkins said.
The uncertainty can be detected in the retail clothing industry as observers point to the closing of the GAP store on Newbury Street in Boston in September, an urban corridor legendary for shopping.Last May,William Guenther, president of the Boston-based public policy firm Mass Insight Corp., said the group’s survey found consumer confidence in Massachusetts had tumbled 43 points over the previous 12 months. Guenther blamed the drop on the so-called “triple threat” of rising gas prices, sagging housing prices and job uncertainty.