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Taking the Economic Pulse

A number of economic reports coming out this past week reflect the grim mood shared by U.S. consumers. Most of the stories were pretty general in nature, but at least one examined the outlook for the supermarket industry.

First, we have to note that most Americans are not in dire financial straits. A relative few are burdened by job loss or a sub-prime mortgage. But read the newspapers and listen to the talking heads on television and you start wondering if it's time to bury your life savings in the potato field out back.

Consumer confidence sank to a five-year low this month, the result of tight credit, rising prices and stalled employment. Some economists are quoted as saying the economy is already in recession, and the earliest we'll drag ourselves out of it may be later this year, after taxpayers have had a chance to play with the money provided as part of the the government's economic stimulus program.

Meanwhile, home prices fell almost 11.5% in January, the steepest drop since records first started being kept in 1987. Although sales of new homes were up, average prices nationwide have been growing more slowly or outright declining for 19 consecutive months.

So... let's eat! An analyst from Banc of America Securities predicts supermarkets will get a boost from more people eating at home. "Clearly, with income growth stalling, consumers are finding it necessary to spend more of their nominal dollars on food, and particularly food at home," he said in a note.

Scott Mushkin, vice president and a senior equity research analyst, was writing for investors, telling them large chains like Safeway and Kroger could very easily outperform the market during this period of instability, with same-store sales liable to reach as high as 7%. Each chain is actively involved in capital projects, store planning, and merchandising and pricing initiatives — all of which appeal to tight-fisted consumers.

With net profits hovering around 2%, the supermarket industry doesn't have a lot of wiggle room. But this is a good time for them to show off and strut their stuff. Let's show everyone what we're capable of. It's time to tout self-reliance and empowerment. Host more health fairs, get staff dietitians out into the stores, promote private label organics and keep stores themselves clean and accessible. That'll give consumers something to feel good about.