Morgan Stanley on Friday sharply cut its forecast for retail sales growth next year, saying US consumer spending will be restricted by declining home values, tighter credit standards and more modest job growth.
Analyst Gregory Melich now expects retail sales to grow 3 percent next year, down from a previous forecast of 4.5 percent. That would mark the slowest annual growth in retail sales since 2003.
His forecast assumes average home prices will fall about 6 percent from where they are now, leading to about US$100 billion less in total consumer spending, half of which he predicts would come from traditional retail categories.
Declining home sales and rising mortgage defaults have sparked fears of a slowdown in spending and forced lending institutions to tighten credit standards. Overall, however, consumers have proven resilient even as prices for gas and food remain high and housing prices decline.
Melich's revised forecast is based on a predicted deceleration in household wealth, credit availability and jobs growth, which he calls "key lead components" of retail sales. Consumer electronics and home improvement sectors are particularly at risk, the analyst said.
Consumer spending is closely watched by economists because it accounts for two-thirds of the total US economy.
Jeoff Hall, chief US economist for financial-information provider Thomson Financial, said Melich's assumptions are valid but it might be a darker take than necessary.
"That's a pretty big haircut he's given the total outlook for 2008," Hall said. "This far in advance, it's difficult to say what is going to happen."
Melich encouraged investors to focus on companies that have the ability to increase earnings in a "decelerating market." He named Wal-Mart Stores Inc, Target Corp, CVS/Caremark Corp, J.C. Penney Co, Coach Inc, Staples Inc, O'Reilly Automotive Inc and Safeway Inc as good bets.
Drug retail could be a safe harbor in a consumer slowdown, particularly CVS/Caremark, Melich said, since it recently acquired Caremark, a "recession-resistant" prescription-driven business.
In the apparel sector, J.C. Penney and Coach have the ability to "drive margins higher, even amid decelerating retail sales," and they proved it in the first and second quarters this year, Melich said.
Staples has a booming international business and room for growth in many markets, Melich said.
Quanta Computer Inc (廣達) chairman Barry Lam (林百里) is expected to share his views about the artificial intelligence (AI) industry’s prospects during his speech at the company’s 37th anniversary ceremony, as AI servers have become a new growth engine for the equipment manufacturing service provider. Lam’s speech is much anticipated, as Quanta has risen as one of the world’s major AI server suppliers. The company reported a 30 percent year-on-year growth in consolidated revenue to NT$1.41 trillion (US$43.35 billion) last year, thanks to fast-growing demand for servers, especially those with AI capabilities. The company told investors in November last year that
Intel Corp has named Tasha Chuang (莊蓓瑜) to lead Intel Taiwan in a bid to reinforce relations between the company and its Taiwanese partners. The appointment of Chuang as general manager for Intel Taiwan takes effect on Thursday, the firm said in a statement yesterday. Chuang is to lead her team in Taiwan to pursue product development and sales growth in an effort to reinforce the company’s ties with its partners and clients, Intel said. Chuang was previously in charge of managing Intel’s ties with leading Taiwanese PC brand Asustek Computer Inc (華碩), which included helping Asustek strengthen its global businesses, the company
Taiwanese suppliers to Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) are expected to follow the contract chipmaker’s step to invest in the US, but their relocation may be seven to eight years away, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. When asked by opposition Chinese Nationalist Party (KMT) Legislator Niu Hsu-ting (牛煦庭) in the legislature about growing concerns that TSMC’s huge investments in the US will prompt its suppliers to follow suit, Kuo said based on the chipmaker’s current limited production volume, it is unlikely to lead its supply chain to go there for now. “Unless TSMC completes its planned six
TikTok abounds with viral videos accusing prestigious brands of secretly manufacturing luxury goods in China so they can be sold at cut prices. However, while these “revelations” are spurious, behind them lurks a well-oiled machine for selling counterfeit goods that is making the most of the confusion surrounding trade tariffs. Chinese content creators who portray themselves as workers or subcontractors in the luxury goods business claim that Beijing has lifted confidentiality clauses on local subcontractors as a way to respond to the huge hike in customs duties imposed on China by US President Donald Trump. They say this Chinese decision, of which Agence
RSS