The jury is out on whether the economy is merely experiencing some unsettling turbulence after clearing the recessionary runway last quarter or is actually headed down again. For most economists, the verdict rests on the strength of retail sales in the holiday shopping season now getting under way. "Half of annual spending in many retail categories," notes economist Roger E. Brinner of DRI/McGraw-Hill, "comes in the November-December spree." If Christmas sales prove depressed, postholiday inventory building will suffer, weakening near-term production and employment prospects.
One somewhat offbeat omen of Christmas retail sales is the so-called Appert Gift-Wrap Indicator. For the past seven years, Peter P. Appert, an analyst at C.J. Lawrence Inc., has been tracking shipments from the five major gift-wrap manufacturers to retailers in the period just before Christmas. "Presumably, if retailers are optimistic about sales prospects for Christmas," Appert says, "they will be aggressive in ordering this highly seasonal product and vice-versa."
Appert's reading this year won't bring economy-watchers much cheer. "Growth in gift-wrap sales," Appert says, "is at its lowest level in over 10 years, suggesting that sales of apparel and other nondurables will be up less than 3% over last Christmas."
Even that view could prove optimistic, according to DRI/McGraw-Hill's Brinner. He thinks that many retailers have been unusually conservative in adding to stocks, both because of fears of slack consumer demand and because of difficulty in obtaining credit. "If stocks on shelves are too sparse," he warns, "consumers will buy fewer goods."