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US Retailers Prepare for Slow Holiday Season - 2001-11-27


For much of this year, the United States has been trying to cope with the effects of a recession. This may be bad news for retailers, but good news for holiday shoppers.

Holiday shopping traffic was higher at the Galleria mall in Glendale, California, by 10 percent this weekend, compared with the same period last year. The Thanksgiving holiday weekend marked the start of the Christmas shopping season in the United States.

Los Angeles resident Mario Zapeda was surprised. "I thought we were in a recession. But then I went to the mall this weekend, and it was jam-packed [crowded]," he says. "So, there's a mixed message there. I don't know if people are trying to save or going for the deals."

Analysts say that, so far, shoppers are "going for the deals," but that is causing a problem. With deep discounts of 30-to-40 percent in some shops and department stores, people are buying more, but profit margins for retailers are falling.

The same thing is happening in the U.S. auto industry, which accounts for more than 20 percent of U.S. retail sales. U.S. carmakers had a record month in October, as the major auto companies offered financing for new cars at an interest rate of zero percent. That can save buyers several thousand dollars on the cost of a vehicle. Auto industry analysts warn that sales may drop in coming months, however, when the discounts are over.

The U.S. airline and travel industries are experiencing a downturn, as more people stay at home in the wake of the terror attacks September 11. And many people seem to be investing in their homes. Low interest rates on home-mortgage loans are helping keep home sales up, and stores that sell home furnishing are also doing a brisk business. At one Los Angeles furniture store, a shopper says she is ready to spend (money) this holiday season. "You want your house comfy, cozy, well furnished and with a fresh new look, so you feel good being at home," she says.

Los Angeles economist Jack Kyser says a diversified economy is important for any community to weather a recession. Ten years ago, this city experienced a recession, when cutbacks in defense spending at the end of the Cold War slashed jobs in the aerospace industry. At the time, defense contractors were major employers in Los Angeles. "Maybe we've learned some things from the early 1990s," says Mr. Kyser. "We are more organized in terms of dealing with our economy, and I think that's the key for us."

The economist says those places with a healthy balance of manufacturing, commercial services and retail businesses should weather the current recession. He notes that Los Angeles, with its blend of commerce, manufacturing, and media companies, now has the right kind of balance.

Other analysts say that, around the United States, the challenge of a recession has a positive benefit in the form of bargains for holiday shoppers.

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