After Christmas, Bargains and a Slowdown

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Shoppers look for holiday clearance deals in Columbus, Ohio

'Tis the week after Christmas, and all through the retail sector, businesses hope that something a little more is stirring. Businesses, in fact, are hoping that the 2000 holiday shopping season isn't over — but that it's just getting ready for its second act.

Last year, sales from the week following Dec. 25 topped sales from Thanksgiving weekend, the season's traditional apex. And this time around, the discounting has already been set in motion by a season of relative slump. So bargains should be plentiful — along with bargain-hunters, for whom that ill-fitting plaid sweater is the perfect excuse to remedy Christmas gift oversights. Profit margins, however, will be slim.

Too little, too late.

There were some glad tidings. Yahoo announced Tuesday its online sales had doubled from 1999, and a Goldman Sachs study found that to be about the norm in a $10 billion season for dot-commerce. But that about does it for retail celebrations. Federated Department Stores Inc., of Macy's and Bloomingdale's fame, said December sales would fall short of its original forecasts, and the forecasts weren't that high to start with. Specialty stores like Gap and Banana Republic are disappointed. And if you want to know what PC sales have been like, check the NASDAQ.

The National Retail Federation has already lowered its forecast once, to a 5 percent gain over 1999 sales, and other analysts see 3 percent. Better than last year, sure, and still awaiting that post-Christmas pop. Not a disaster. But definitely ho-hum.

Whose slowdown is it anyway?

What happened? Bad weather in the Midwest and Southeast kept shoppers home; rising fuel prices kept their budgets tight. There was that whole presidential election thing. And as George W. Bush has been so studiously pointing out, we're in the middle of an economic slowdown. And shoppers, who account for two-thirds of the U.S. economy, know it.

It's not Bush's fault; he's just reading the headlines aloud and softening up the ground a little for his $1.3 trillion tax cut. It's not Clinton's fault, though it's still on his watch; the economy, with a lot of help from global doldrums (Japan just keeps getting worse and worse), is coming in for a rate-hike induced landing after a torrid spring 2000.

Yes, it'll be Greenspan that gets blamed if those six tightenings ending last spring put the boom into convulsions, but the Fed chairman figures that a slowdown would be much easier to bear — and modulate — than, say, stagflation, and that he can always slash short-term rates in January and beyond if things look dire.

A soft landing, or a bumpy ride?

The markets, for whom things look plenty dire right now, are expecting just that, and have already begun the process of pricing in a quarter-point cut. That'll help share prices in January, which could help raise consumer spirits and eventually get businesses borrowing and growing again. But the effects of rate cuts — and any tax cut Bush can slide through — will be strictly psychological for the better part of a year.

What happens between now and then will be the landing — 3-4 percent is soft, 1-2 percent is bumpy but livable. Anything less is the end of the greatest economic expansion in modern history, and a very serious problem for President Bush, even if nobody's at fault but the business cycle (and possibly an overly inflation-obsessed Fed.)

But Bush isn't talking so gloomily because he's panicking. Greenspan hasn't let the U.S. economy so much as scrape its knee in a long, long time. The plane (sorry about changing that metaphor), which has been on a steep ascent all year, is leveling off as corrections in the markets provide a downdraft and the New Economy succumbs to a touch of jetlag. But we haven't crashed yet, and we jettisoned inflation fears over Lake Michigan sometime this fall.

How will the flight be in 2001? Bush, selling a tax cut, and the Fed, selling confidence, will be sure to keep everybody posted as the numbers and the reports come in. We may be due for a recession — heck, we may already be in one, and not recognize it yet. And what consumers do from here on out may tell the tale.

As if there weren't enough pressure on guys for Valentine's Day.