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New Index Shows Retailers Optimistic

NEW YORK -- Convenience Store News introduces the VNU Retail Index, an innovative economic indicator presented by VNU Business Media and ACNielsen. The Retail Index is designed to uncover new insights into retailers' assessments of their current and future business conditions.

While retailers' assessment of current business conditions has improved steadily from December 2003, a significant jump was experienced in the March and April periods, which appear to be tied to the huge increases in jobs that were realized in the economy. March and April added 337,000 and 288,000 jobs respectively, much higher than expected, and more than the 200,000 needed to sustain the workforce.

Interestingly, the May 2004 results dipped, which also was in alignment with other consumer sentiment indexes and points to both the consumer and retailer being concerned with the effect of rising gas prices on consumer spending.

Looking forward, retailers have generally been more optimistic regarding economic conditions improving in the next six months. Retailer sentiment is that the remainder of 2004 is set up well for growth, although there are concerns that could hamper that, namely geopolitical unrest, rising gas prices and strong year-ago comparisons.

In May, supermarkets and c-stores were almost tied in expectations of increasing their workforce (45 and 46.2 percent, respectively), though c-stores were also highest in expectations of decreasing the workforce (9.2 percent, compared to an average 6.3 percent). During this month, the West was far behind other regions in expectations of adding workers (27.8 percent), while the South was most likely to add (48.8 percent). The smallest companies across all channels (1-25 units) were most likely to remain unchanged (59.2 percent).

"Continually over the course of six months of sentiment surveys, retailers are ranking the competitive environment as their No. 1 challenge in the marketplace," said James Russo, director of ACNielsen Retail Services. "Interestingly, while retailers were citing expense control as a challenge in the first several months, it has now dropped while a focus on economic conditions has moved up to the No. 2 spot in May."

The VNU Retail Index is based on survey results received on a monthly basis from a panel of more then 500 convenience, drug, grocery, mass and specialty retailers across the country. The survey contains six questions calling for an appraisal of current business conditions and operational challenges, as well as expectations regarding business conditions, hiring and store count in the next six months.

If you are a retailer interested in joining the VNU Retail Index panel, please contact Debra Chanil, director of market research, at [email protected].
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