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MPamela Hughes has seen better days as owner of Annabel's, a women's clothing store in Susquehanna Twp.
Annual sales growth is running half what it was in the late 1990s, Hughes said, declining to reveal the store's numbers. Shoppers aren't buying as much as they used to, picking up only a jacket rather than a whole suit.
Nonetheless, Hughes is optimistic.
"I'm still seeing my same customers, and I'm getting a lot of new customers," Hughes said. "So, I think that's a good sign."
Hughes has reason to hope. The economy has been recovering after years of slow growth. In the first three months of 2005, the U.S. economy expanded at an annual rate of 3.5 percent, according to the U.S. Department of Commerce.
But, even as the economy rebounds, the retail sector likely won't improve much for shop owners such as Hughes, said Gail Fosler, chief economist with The Conference Board, a business research group in New York City. The Wall Street Journal has twice named Fosler as America's most accurate economic forecaster.
"As someone who earned a reputation as an optimist, I would like to tell you that things are going to get better," Fosler said.
Instead, she said, the environment is likely to stay the same for retailers for the next few years. Retail sales will grow about 6 percent a year, after spiking above 9 percent in 2000.
Fosler based her forecast on the way consumers kept spending in spite of the slowdown in the first half of this decade. Typically, consumers spend less in a downturn.
But, fueled by low interest rates and easy credit, spending grew steadily, even as wages held flat or fell lower.
"This is the first recession in recent memory where consumer spending has not declined," Fosler said.
Spending is unlikely to spike upward now that the economy is getting better, she said. People are likely to devote their extra cash to savings.
Gas prices, though high, won't have much of an effect, Fosler added. Prices have bounced up and down over the last few years without having a strong impact on consumer behavior.
The economy today is like it was in the mid 1990s, Fosler said. However, people are basing their expectations on the late 1990s, an exceptional growth period, and may feel as though times are worse than they really are.
Larry Feldman isn't persuaded by the claims of a stable retail environment. He is chairman and chief executive officer of New York-based Feldman Mall Properties Inc., which owns Harrisburg Mall and other retail centers across the United States.
"I just don't believe in predictions, because they have been completely wrong," he said.
A few years ago, many people wrote off malls as headed for the trash heap, he said. The Harrisburg center, formerly known as Harrisburg East Mall, was teetering on the edge.
"This was a mall that was rundown; that was really not far away from being demolished," Feldman said. "That's how rundown it had become."
In the last few years, however, malls have roared back. For example, Feldman is pouring $45 million into the Harrisburg Mall. The center has attracted a Bass Pro Shops store, a movie theater and other retailers.
Feldman's company was able to raise money for the renovation because of low interest rates and investor enthusiasm for commercial real estate ventures.
Shops also have high hopes.
"The bullishness on the part of retailers to lease space is just incredible right now," Feldman said.
A booming residential real estate market has lifted sales at Wicker East, a family-owned furniture store in Hampden Twp.
"We're pleased with sales and, generally speaking, they seem to be pretty strong," said Eric Hollenbach, a co-owner of the store, which used to be in Paxtang.
Annual sales are $1.4 million, and growing faster than they were in the 1990s, Hollenbach said. Like many people, however, Hollenbach can't help hearing about a potential housing bubble and consumers overloaded with debt.
"We're not concerned," he said of the news reports he has seen. But, he added, "You just wonder, I guess."
If people are strapped for cash, they will continue buying the necessities, Hollenbach said. But, they might not shell out for new wicker chairs, tables and bedroom sets.
"Our stuff can wait," Hollenbach said.
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