CONSUMER CONFIDENCE CONTINUES TO LAG

A good deal of the recent press points to the beginning of our economic recovery. First quarter
GDP was 3.2%, driven by increases in both business and consumer spending. Further
evidence supporting the recovery is the 7.6% month-on-month increase in total retail sales as of
March, with the major shopping center categories seeing 3% to 5% growth. In addition, the
Real Estate Roundtable’s latest quarterly sentiment report points to a leveling-off in property
value declines and 82% seeing better market conditions than a year ago.

Even with these positives, some measures continue to lag at worrisome levels. The recent
slight increase in unemployment is expected at this point in the recovery. More troubling,
however, is the level of initial unemployment claims – now running at almost 460,000 (on a 4-
week moving average basis). Although vastly improved from the 617,000-level of a year ago,
claims are well above what we would want to see in a recovery and “uncomfortable” because
they have been stuck in the mid-400,000 range since late 2009.

The consumer looks to be viewing these mixed metrics with uneasiness. Although confidence
has improved from the historic lows, current levels suggest a real risk of ongoing psychological
caution – which could keep them sidelined and limit the scale and timing of recovery.

While some may point

out that confidence slid CONSUMER CONFIDENCE INDEX
after the 2001 downturn (1985 = 100)
– many experts worried 160

at that time that a Recession -

140 December 2007 to
double-dip recession June 2009
could be on the horizon 120
due, in part, to the
continued erosion of 100

the stock market from 80

repercussions of the
tech meltdown. 60

40 Recession -
Even looking back to March to
the significant value 20 November 2001
washed out of the stock
market during 2001– 0

2002, confidence
0

0
n-0

n-0

n-0

n-0

n-0

n-0

n-0

n-0

n-0

n-0

n-1

began to tick higher in

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

Ja

2003, approaching a Source: The Conference Board; Economy.com; Walter S. Bialas

more normal level in

2004.

At this juncture, the consumer is far from fully engaged – a critical ingredient for the recovery to
continue and gain momentum.

Walter Bialas has more than 25 years of real estate advisory experience in consulting, banking and development.
Walter currently serves as chair of ICSC’s North American Research Task Force and is an active member of ULI’s
Advisory Services program. He can be reached at 703-919-8553 or by email at wbialas@verizon.net.

May 2010