No one wants to hear this…
The most basic factor of economic growth in this country, consumer spending, is flashing a warning sign about the U.S. economy.
According to Gallup, weekly U.S. economic confidence for the week of September 30 to October 6 plummeted the most since the Lehman Brothers’ fall in 2008. The index suggests consumer confidence is down significantly since mid-September, and it now stands at the lowest level since December of 2011. (Source: Gallup, October 8, 2013.)
Unfortunately, Gallup’s confidence index is not the only indicator suggesting consumer spending is plummeting. The Thomson Reuter/University of Michigan’s preliminary consumer sentiment index for October declined to 75.2 from 77.5 in September—the lowest figure since January of this year. (Source: Reuters, October 11, 2013.)
And companies that are dependent on consumer spending are seeing a downtick in sales. Take The Gap, Inc. (NYSE/GAP), for example. The company reported a decline of three percent in same store sales for the month of September. In the same period a year ago, the company’s same store sales were up three percent! (Source: The Gap, Inc., October 10, 2013.)
I’m not shocked at all when I see statistics that show consumer spending is getting weaker and weaker. In fact, I have been writing about this issue for a while. Consumer spending in the U.S. economy is in jeopardy—all the indicators are suggesting we have more chances of seeing it decline than seeing a robust move to the upside.
And that brings me to the essence of today’s message: Retailers in the U.S. economy are not going to have a robust holiday season. Even if we are able to see some increases in consumer spending, it will be because of deep discounts being pushed by retailers—the same scenario we saw played out during the back-to-school shopping season.
Our economy is based on consumer spending, accounting for about two-thirds of U.S. gross domestic product (GDP). Those who are hoping for a turnaround in the U.S. economy have to really think again.
What He Said:
“You’ve been reading my articles over the past few months and have seen how negative I’ve become on the U.S. economy. Particularly, I believe it’s the ramifications of the faltering housing sector which is being underestimated by economists. A recession doesn’t take much to happen. It’s disappointing more hasn’t been written on the popular financial sites and in the newspapers about the real threat of a recession happening in 2007. I want my readers to be fully aware of my economic opinion: I wouldn’t be surprised to see the U.S. economy in a recession sometime in 2007. In fact, I expect it.” Michael Lombardi in Profit Confidential, November 13, 2006. Michael was one of the first to predict a U.S. recession, long before Wall Street analysts and economists even thought it a possibility.