Consumers Are Holding Back

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Where people see real deals, they are spending, though not lavishly. Whereas almost all retailers reported negative sales for apparel and home goods for the past three months, TJX (TJX) has not reported a single month of negative sales during the downturn, including a 3% same-store sales gain in February. The Framingham (Mass.)-based off-price retailer buys excess merchandise in bulk from manufacturers below wholesale prices and sells them at its T.J. Maxx, Marshalls, and Home Goods stores. "Deals are about the only thing that's working right now," notes Deloitte's Conroy.

Mixed Housing News

The same logic might also be at play in the housing market. The Standard & Poor's/Case-Shiller index, which tracks prices for 20 major cities, reported that house prices in every city that it tracks have fallen for five consecutive months. Those prices were down 10.7% in January from a year earlier. But some people apparently are starting to poke their heads out of their foxholes to look for bargains. Sales of existing homes increased for the first time in seven months, rising 2.9% in February from January, according to a National Association of Realtors report that came out on Mar. 24.

Of course, a day after the NAR report came out, the Commerce Dept. countered it with data showing that new-home sales had dropped 29.8% last month (BusinessWeek.com, 3/26/08) from a year earlier, to a seasonally adjusted annual rate of 590,000 units.

What might give consumers some hope? Mortgage rates could begin falling in line with lower shorter-term rates. And the federal government's tax rebate checks—$600 for most individuals and $1,200 for couples filing jointly, with a $300 per-child credit—will be mailed out starting in May. The University of Michigan's Curtin says he found that 70% of those people who are due to receive checks plan to pay down credit-card bills and build up savings, rather than spend the money. But even that will help, he says: "That will free up some money for some spending and will definitely produce a noticeable blip in GDP."

Gogoi is a contributing writer for BusinessWeek.com.