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CNN Live Saturday

Interview With Paul Krugman

Aired December 20, 2003 - 18:42   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CAROL LIN, CNN ANCHOR: Whether your choice is the local mall or the nearest discount retailer, if you braved the crowds today, you already know this, it is probably the busiest shopping day of the year. And what are all of those shoppers looking for? Our Michael Okwu sums it up in one word -- bargains.
(BEGIN VIDEOTAPE)

MICHAEL OKWU, CNN CORRESPONDENT (voice-over): This is the sound of a retailer's Christmas carol. On the busiest shopping day of the year, Americans appearing to do just that, shop after weeks of yuletide procrastination.

UNIDENTIFIED FEMALE: Well, I just started. I am a little late.

OKWU: According to the National Federal of Retailers as of Saturday morning, Americans still had a third of their shopping to do.

(on camera): Do you still have a lot more shopping to do?

UNIDENTIFIED MALE: Yes. I am going to run around the whole mall today.

DANA TELSEY, RETAIL ANALYST, BEAR STEARNS: The discounts definitely come the closer you get towards Christmas, and consumers have been trained to wait.

OKWU (voice-over): Bargain hunting and bad weather earlier in the month compelled some of the nations largest retailers to project bad tidings. But experts say retailers will see the bulk of holiday spending between now and Christmas.

TELSEY: They are going to make more money this year than last year. Since they have less inventory, they are being able to sell more at full price. And consumers basically are beginning to see that if they don't go early, or if they don't buy things when they see them they may not be there.

UNIDENTIFIED FEMALE: I am just going to spend money.

OKWU: Analysts say consumer confidence is high, that unlike last year there are no war jitters. Big ticket items, MP3 players, Ipods and ammo dolls for kids.

UNIDENTIFIED FEMALE: Videogames, legos, videogames, videogames.

UNIDENTIFIED MALE: I have done everything on the Internet. Everything is on the Internet.

OKWU: Retailers say one in three Christmas shoppers will buy online. Fancy a splurge, well, line up. Luxury items are selling. But tried and true products are still the rage, if you believe the tried and true experts.

UNIDENTIFIED MALE: Barbie's kitchen, Barbie's home set, Barbie's car, Barbie's computer, Barbie's bakeshop, everything with Barbie.

OKWU: Go figure, Michael Okwu, CNN, New York.

(END VIDEOTAPE)

LIN: With Christmas five days away, will those bargain hunters be enough to sound jingle bells for retailers? Scott Krugman is with the National Retail Federation. Scott, thank you very much for being here today, happy holidays.

PAUL KRUGMAN, NATIONAL RETAIL FEDERATION: Happy holidays.

LIN: I am going to have a moment of honesty with you, OK.

KRUGMAN: You haven't started.

LIN: I've got to ask you, listen, you know, why is the retailer and what is happening with the retailers so important that we need to discuss this? Because frankly I look at what is happening out there and if it is bad for retailers it is good for the consumers. It means I am going to get a sale because the retailer is desperate for business.

KRUGMAN: Well, let's turn that around. Bad fore retailers is bad for the economy. Consumer spending accounts for two thirds of economic growth. And that's a lot. And it can't be ignored. Retail is certainly a driver of the economy.

LIN: All right, so what is happening out there this holiday season. This is the last weekend. Is it looking good for retailers then?

KRUGMAN: Well, you know, this is the busiest weekend of this year. Today is actually the busiest shopping day of the year. When it is all said and done and all the receipts are tallied, the National Retail Federal is anticipating a 5.7 percent increase. That would be $217 billion in total retail sales.

LIN: So what are the retailers doing then to make those last minute sales? Are you seeing more sales this year because consumers have been conditioned to lower prices and waiting until the last minute?

KRUGMAN: We've all heard the wonderful job that retailers have done in keeping inventory under control, which means that discounting isn't as frantic as it has in the past. With that said, there is still plenty of great deals out there for consumers. This is really a win-win situation. Consumers are going to get some great prices. And retailers are not going to get hurt by the profit picture.

LIN: So what is good out there? What are the good deals out there this holiday season?

KRUGMAN: Well, we have all seen reports on $20 DVD players. But right now, your best bet is apparel. Retailers are clearing out the winter inventory to make room for the spring merchandise, which means apparel is probably going to be the highest discounted merchandise that there is right now out there. I tried to find a sweater today, couldn't find my size.

LIN: Oh, I'm sorry, Scott. Well, I'm sure you got some pull somewhere. You can get your size. So what about online shopping, is that still as big a deal for shoppers? Or do people want to go out there and touch and feel?

KRUGMAN: People do want to touch and feel, but people are also tired of looking for parking spots. And if you were in the northeast over the winter, about a week after Thanksgiving you might have been snowed in. Online shopping is becoming more and more popular. Retailers are utilizing the channel to create a multichannel experience for their customers, which means you can buy it online, pick it up in the store, buy it online return it in the store. Your options are unlimited.

LIN: Now, I also hear that it is the specialty stores, the high end stores that are doing particularly well this year, and it is the discounters that are kind of hurting. What does that tell you about what is happening out there?

KRUGMAN: Well, the National Retail Federation has done a survey. And consumers are telling us that they're shopping at all channels, in all formats. That tells us the price-value equation is shifting. Price isn't the first thing on consumers minds. They are also looking for selection. They are looking for quality of merchandise. They are shopping for others but they are also shopping for themselves. And, you know, everything goes.

LIN: So all indications right now, what does this tell you about the economy as a whole for the year to come and maybe the stock market as well?

KRUGMAN: Well, this is really a tale of two economies from last year to this year, consumer confidence was down last year. We had a threat of war, of the housing market wasn't as strong. This year, however, everything seems to have turned around. Consumers have a little bit more spending power. They have more confidence in the economy. Hey, we have captured Saddam Hussein. This is certainly going to have a psychological impact on consumers. And we think that is going to make for strong gains in retail this holiday season.

LIN: So do you think that means more jobs then for folks out there?

KRUGMAN: You know, we've seen the drop in jobless claims. And jobs are usually the last domino to fall in economic recovery. And we think as the good news keeps coming in, we think the job market is going to certainly improve through next year.

LIN: Wow, it is looking pretty rosy. Thank you very much, Scott.

KRUGMAN: Thank you, happy holidays.

LIN: Happy holidays. And I hope you find your sweater.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired December 20, 2003 - 18:42   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL LIN, CNN ANCHOR: Whether your choice is the local mall or the nearest discount retailer, if you braved the crowds today, you already know this, it is probably the busiest shopping day of the year. And what are all of those shoppers looking for? Our Michael Okwu sums it up in one word -- bargains.
(BEGIN VIDEOTAPE)

MICHAEL OKWU, CNN CORRESPONDENT (voice-over): This is the sound of a retailer's Christmas carol. On the busiest shopping day of the year, Americans appearing to do just that, shop after weeks of yuletide procrastination.

UNIDENTIFIED FEMALE: Well, I just started. I am a little late.

OKWU: According to the National Federal of Retailers as of Saturday morning, Americans still had a third of their shopping to do.

(on camera): Do you still have a lot more shopping to do?

UNIDENTIFIED MALE: Yes. I am going to run around the whole mall today.

DANA TELSEY, RETAIL ANALYST, BEAR STEARNS: The discounts definitely come the closer you get towards Christmas, and consumers have been trained to wait.

OKWU (voice-over): Bargain hunting and bad weather earlier in the month compelled some of the nations largest retailers to project bad tidings. But experts say retailers will see the bulk of holiday spending between now and Christmas.

TELSEY: They are going to make more money this year than last year. Since they have less inventory, they are being able to sell more at full price. And consumers basically are beginning to see that if they don't go early, or if they don't buy things when they see them they may not be there.

UNIDENTIFIED FEMALE: I am just going to spend money.

OKWU: Analysts say consumer confidence is high, that unlike last year there are no war jitters. Big ticket items, MP3 players, Ipods and ammo dolls for kids.

UNIDENTIFIED FEMALE: Videogames, legos, videogames, videogames.

UNIDENTIFIED MALE: I have done everything on the Internet. Everything is on the Internet.

OKWU: Retailers say one in three Christmas shoppers will buy online. Fancy a splurge, well, line up. Luxury items are selling. But tried and true products are still the rage, if you believe the tried and true experts.

UNIDENTIFIED MALE: Barbie's kitchen, Barbie's home set, Barbie's car, Barbie's computer, Barbie's bakeshop, everything with Barbie.

OKWU: Go figure, Michael Okwu, CNN, New York.

(END VIDEOTAPE)

LIN: With Christmas five days away, will those bargain hunters be enough to sound jingle bells for retailers? Scott Krugman is with the National Retail Federation. Scott, thank you very much for being here today, happy holidays.

PAUL KRUGMAN, NATIONAL RETAIL FEDERATION: Happy holidays.

LIN: I am going to have a moment of honesty with you, OK.

KRUGMAN: You haven't started.

LIN: I've got to ask you, listen, you know, why is the retailer and what is happening with the retailers so important that we need to discuss this? Because frankly I look at what is happening out there and if it is bad for retailers it is good for the consumers. It means I am going to get a sale because the retailer is desperate for business.

KRUGMAN: Well, let's turn that around. Bad fore retailers is bad for the economy. Consumer spending accounts for two thirds of economic growth. And that's a lot. And it can't be ignored. Retail is certainly a driver of the economy.

LIN: All right, so what is happening out there this holiday season. This is the last weekend. Is it looking good for retailers then?

KRUGMAN: Well, you know, this is the busiest weekend of this year. Today is actually the busiest shopping day of the year. When it is all said and done and all the receipts are tallied, the National Retail Federal is anticipating a 5.7 percent increase. That would be $217 billion in total retail sales.

LIN: So what are the retailers doing then to make those last minute sales? Are you seeing more sales this year because consumers have been conditioned to lower prices and waiting until the last minute?

KRUGMAN: We've all heard the wonderful job that retailers have done in keeping inventory under control, which means that discounting isn't as frantic as it has in the past. With that said, there is still plenty of great deals out there for consumers. This is really a win-win situation. Consumers are going to get some great prices. And retailers are not going to get hurt by the profit picture.

LIN: So what is good out there? What are the good deals out there this holiday season?

KRUGMAN: Well, we have all seen reports on $20 DVD players. But right now, your best bet is apparel. Retailers are clearing out the winter inventory to make room for the spring merchandise, which means apparel is probably going to be the highest discounted merchandise that there is right now out there. I tried to find a sweater today, couldn't find my size.

LIN: Oh, I'm sorry, Scott. Well, I'm sure you got some pull somewhere. You can get your size. So what about online shopping, is that still as big a deal for shoppers? Or do people want to go out there and touch and feel?

KRUGMAN: People do want to touch and feel, but people are also tired of looking for parking spots. And if you were in the northeast over the winter, about a week after Thanksgiving you might have been snowed in. Online shopping is becoming more and more popular. Retailers are utilizing the channel to create a multichannel experience for their customers, which means you can buy it online, pick it up in the store, buy it online return it in the store. Your options are unlimited.

LIN: Now, I also hear that it is the specialty stores, the high end stores that are doing particularly well this year, and it is the discounters that are kind of hurting. What does that tell you about what is happening out there?

KRUGMAN: Well, the National Retail Federation has done a survey. And consumers are telling us that they're shopping at all channels, in all formats. That tells us the price-value equation is shifting. Price isn't the first thing on consumers minds. They are also looking for selection. They are looking for quality of merchandise. They are shopping for others but they are also shopping for themselves. And, you know, everything goes.

LIN: So all indications right now, what does this tell you about the economy as a whole for the year to come and maybe the stock market as well?

KRUGMAN: Well, this is really a tale of two economies from last year to this year, consumer confidence was down last year. We had a threat of war, of the housing market wasn't as strong. This year, however, everything seems to have turned around. Consumers have a little bit more spending power. They have more confidence in the economy. Hey, we have captured Saddam Hussein. This is certainly going to have a psychological impact on consumers. And we think that is going to make for strong gains in retail this holiday season.

LIN: So do you think that means more jobs then for folks out there?

KRUGMAN: You know, we've seen the drop in jobless claims. And jobs are usually the last domino to fall in economic recovery. And we think as the good news keeps coming in, we think the job market is going to certainly improve through next year.

LIN: Wow, it is looking pretty rosy. Thank you very much, Scott.

KRUGMAN: Thank you, happy holidays.

LIN: Happy holidays. And I hope you find your sweater.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com