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May 09, 2007
Is The Consumer Ready For A Standing Eight Count?
The Wall Street Journal's Christopher Conkey and Phil Izzo think maybe so (page A4 of the print edition):
Signs are emerging that American consumers may be getting tired of carrying the economy. How much they pull back will be a major factor in whether the U.S. economy keeps slowing or whether the pace of growth perks up.
Consumer purchases of goods and services increased at a robust 4% inflation-adjusted annual clip in the past two quarters. But economists and retail executives now see signs that the anticipated slowdown is at hand. Gasoline prices are pinching, the housing slump continues and the labor market, which has provided significant support, is showing signs of fatigue.
The Journal authors seem to be anticipating that, when the week is done, the emerging picture on retail trade will not be a pretty one:
Amid concern about consumers' habits, big retailers issue April sales reports tomorrow, and the Commerce Department follows on Friday with its estimate of retail sales in April. Yesterday, Redbook research said its index of chain-store sales in April fell 4.1% from March. The International Council of Shopping Centers said its measure of chain-store sales last week was running only 1.7% higher than a year ago, the weakest ICSC reading since early March, when the index matched a nearly four-year low...
Sears Holdings Corp. last week said it would miss earnings estimates for its first quarter ended May 5. Chairman Edward Lampert said, "I'm sort of cautious about the economy." That added to downbeat assessments from Wal-Mart Stores Inc. and Target Corp., which has said same-store sales in April were "much weaker" than initial expectations. Circuit City Stores Inc. has cited weak demand for flat-screen televisions, and Talbots Inc. and Bebe Stores Inc. noted lackluster sales of apparel.
Consumer spending accounts for 70% of all spending, so a slowdown is always significant, but even more so now with business investment sluggish...
A few things to keep in mind. First, retail trade, which does not include services, is only a piece of the consumption pie:
Second, over the past year or so growth in personal consumption expenditures has not been tracking growth in retail sales particularly closely :
I don't argue the article's broad point that there are plenty of reasons to suspect that consumers might retrench. But it is wise to remember that in the recent past the death of the consumer has been greatly exaggerated more than once.
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