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A Gathering Storm

Each year, Convenience Store News conducts the industry's only research report forecasting the upcoming year's sales in key product categories, the results of which will be published in the January issue of CSNews. The study includes sales forecasts for motor fuels, cigarettes, other tobacco products, packaged beverages, beer and malt beverages, candy and gum, and salty snacks. In addition, economist Maureen Maguire provided attendees of the CSNews Forecast Council with a macro-economic view of the U.S. economy and its prospects in the year ahead.

"We are in uncharted waters in terms of the severity of the economic situation we are in," said Maguire, who is president of ThinkResearch, an economic consulting firm. "The Federal Reserve is pumping liquidity into the markets at an unprecedented pace and we are at an inflection point where half of the economists see a positive year ahead and half see it as negative."

Economists may be split 50/50 about the future economic prospects of the nation, but the majority of retailers representing both big chains (such as 7-Eleven and ampm) and independents (such as Convenient Food Mart and Royal Buying Group) fell squarely in the negative camp.

In fact, one retailer, who is also a major refiner, is extremely worried that gas prices at retail will be driven higher than $4 a gallon again next spring by speculators in the oil commodities markets. "Can you imagine the impact of $4 a gallon gas on consumer spending now?" asked the refiner/retailer. "The whole tragedy is that we are letting [speculators] do it again."

The average price for a gallon of regular unleaded gasoline will peak in 2010 at $3.40, according to a quick poll of Forecast Council attendees. That compares to the EIA's forecasted average price per gallon for 2009 of just $2.26.

The outlook for unemployment also makes retailers queasy. Few on the council believe President Barack Obama's stimulus spending has created the number of jobs promised, and most foresee last month's 10.2 percent unemployment rate rising even higher next year, with predictions ranging to as high as 12.7 percent. (The mean average of all Forecast Council attendees was 11.12 percent.)

If that's not bad enough, even more ominous for the future is the swelling federal budget deficit -- already bloated from the Wall Street bailouts and the so-called "stimulus" spending. Health care "reform" -- continuing its slow, but inexorable way through Congress -- will likely heap trillions more in debt on the nation's balance sheet. And if proposed cap-and-trade climate control legislation is passed next year, it could bring even a small economic recovery to a grinding halt.

Nevertheless, whatever happens on the national scene, all evidence leads me to believe convenience store retailers will continue to navigate the stormy economic seas a lot better than most other types of retail channels. The consumer need for convenience -- in whatever form that takes -- should keep convenience retailers relevant and financially strong in the year ahead.

As we put our last issue of 2009 to bed, I want to wish all of our readers the best holiday season imaginable. Spend time with your family and remember the things that really matter most in your lives. It continues to be a privilege to be your trusted information provider, and we promise to continue earning your trust and loyalty in the New Year.
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