RSSCranky Consumers Turn Shopkeepers Glum
Where is the pleasure in being a shopkeeper these days? Angry and depressed consumers have lost their usual “joie de vivre” and are staying away from shopping malls and other retail outlets in droves. The latest government report says that total retail sales are up 2.9% in March 2008 versus last year on a current dollar basis, but this almost undoubtedly means a decline on a constant dollar (i.e., inflation-adjusted) basis.
In any event, the retail sales growth figure is now at its lowest level in five years. Suzy Shopper is aware that the new spring fashions aren’t flying off the shelves; Charlie Carpenter is commenting on the reduced traffic at his local hardware store; and Tommy Traveler isn’t just hopping into his SUV for weekend jaunts the same as in the past.
What has reduced the “urge to splurge”?
People are worried about their jobs. During the last serious economic downturn, more than two million jobs were lost. After almost five years of steadily increasing employment from one month to the next, there were job losses in each of the first three months of this year. This erodes consumer confidence.
People don’t feel as prosperous as they did a couple of years ago. That’s what happens when house prices drop. Lower house prices are the result of an excess of unsold inventory due to overbuilding and mortgage foreclosures. This “loss of wealth” effect seriously inhibits any extra spending or borrowing that would increase risk.
Who’s got the money for gasoline? Gasoline prices usually move in tandem with world oil prices. The present is currently a period of intense speculation in all commodities. Investors have been shifting out of equities and into raw materials. Beyond this general trend, oil has its own specific “drivers”. Spring is traditionally a period of price run-ups in anticipation of the vacation driving season that lies ahead in the summer.
Speculators may be about to get burned. This can happen when you play with fire, or fuel, as the case may be. A weaker economy and high gasoline prices will see cash-strapped Americans staying closer to home. Furthermore, the influx of tourists from abroad, as a result of the lower-valued greenback, is mainly destination-oriented as opposed to “let’s pile into a car and tour the country.”
Finally, the Presidential election may be starting to wear on people’s nerves. Nobody is quite sure who the candidates will be. The Republicans have the matter locked up, but the Democrats are embroiled in an internecine struggle that threatens to drag on for some time. And the (mainly negative) claims and counter-claims about the economy and who has the right answers become confusing and unsettling. Whenever there is uncertainty in politics, a lack of confidence is sure to follow. This often finds expression in delayed investment decisions, until it becomes clear which way the regulatory winds will blow.
Having said all of the foregoing, maybe a pause in the usual shopping madness might not be altogether bad. For example, mom and dad might just catch a break or two, from the usual steady financial drain of being parents, as Prom season approaches.
(See also related Market Insights story, with charts.)
Alex Carrick
