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    Recession in '08?

    Economist predicts 30 percent probability of U.S. economic slowdown at CSNews 2008 Industry Forecast Council meeting.

    NEW YORK -- With the price of oil hitting new highs, the housing bubble bursting and consumer confidence waning, how will c-stores fare over the next 12 months? That was the question facing the Convenience Store News Industry Forecast Council, which met in New York on Friday to discuss the results of the 5th annual Convenience Industry Forecast.

    In a discussion of overall economic trends, Maureen Maguire, president of ThinkResearch, predicted, "A slowdown is not out the picture, with a 30 percent probability of a recession occurring in 2008."

    Maguire continued, "The economy is on a precipice, with two emergency rate easings by the Fed and continued fallout in the financial markets."

    This year's Forecast Council participants included Gary Braaten of Cenex/CHS Inc.; Paul Casadont of Chevron; Sonja Hubbard of E-Z Mart Stores Inc.; Dean Dirks, Firsthand Management; Michael Zielinski of Royal Buying Group; Michael Scarpelli of Southwest Convenience Stores (Alon USA), and Tony Bartys of Valero Energy Corp. The CSNews Industry Forecast Council is sponsored by Altadis U.S.A., General Mills, JustBorn and McLane Co. Inc.

    Virtually all Forecast Council participants expect the price of oil to hit $100 per barrel before the end of this year. "Ramifications for the consumer have yet to be seen, but consumers are nervous," Maguire said.

    However, the outlook for c-stores is cautiously optimistic. "Gasoline -- for the foreseeable future -- will continue to be demanded and retail sales appear strong," said Maguire.

    Leading up to the holiday season, the latest employment report, released by the Bureau of Labor Statistics (BLS) on Nov. 2, showed retail jobs posted declines in August, September and October, an ominous indicator leading up to a holiday season. This decline can be explained in part by industry consolidation. "Retail sales did meet expectations in the last report released Nov. 14 by the Census Bureau, but I’m frankly nervous about the holiday shopping season," Maguire said.

    Another speaker at the meeting -- James Russo, vice president of business development for TNS Retail Forward -- said the consumer research and consulting firm predicts fourth quarter retail sales growth to slow to 3.3 percent, from 4.6 percent in 2006. This forecast includes home improvement stores, catalogs, online sales and the key retail sectors -- where many holiday gifts are traditionally purchased -- known as GAFO: general merchandise stores such as conventional and discount department stores, supercenters, warehouse clubs, apparel stores, furniture, home furnishings, consumer electronics and other specialty stores, as well as home improvement stores, catalogs and online sales.

    Looking past the holiday season, both demand and cost of retail gas and home heating oil are expected to rise. "People have to heat their homes, so the tradeoff is going to come from their discretionary income, but exactly where, we don’t yet know," Maguire said.

    The CSNews 2008 Industry Forecast also projects 2008 sales for the key c-store categories of motor fuels, cigarettes, other tobacco products, malt beverages, packaged beverages, confectionery and salty snacks.

    For details of the CSNews 2008 Industry Forecast, see our Jan. 14, 2008, issue.

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