For all intents and purposes consumers are the U.S. economy, or at least two-thirds of it. If people are feeling good and spending in America, everything is awesome. When consumer sentiment turns sour and families rein in spending, the economy’s headed for trouble. That’s why retail spending is used by many analysts as a barometer of the health of the economy and currently that barometer’s suggesting there are stormy days ahead.
Looking at the numbers one would guess consumers would be in a better mood. Unemployment remains low, salaries are rising slowly, core inflation is in check and we’re getting a break on fuel prices that adds up to nearly $500 a year for the average family. But oddly none of that is encouraging consumers to spend more and the retail industry, the canary in the economic coal mine, is starting to look a little sick.
Retail Spending Down
In 2015 U.S. retail spending fell to its lowest rate since 2009. If you remember we were in the midst of massive layoffs and an ongoing financial disaster in those days. Retailers are blaming unseasonably warm weather in December for anemic holiday sales but then again, retailers would prefer a nice, self-contained rationale to delving too deeply into the underlying weaknesses in our economy. Weather can’t account for the fact that for all of 2015 retail sales rose a meager 2.1 percent from last year, barely beating inflation. There’s just no way to put any good news spin on 2015 retail sales.
The biggest store closure announcement comes from Walmart, putting out word that they were closing 269 stores worldwide, more than half of them in the U.S. and accounting for one percent of Walmart’s revenue. The company previously warned its revenue could be down as much as twelve percent.
The weakness in retail extended farther than Walmart, with Kmart also closing twenty seven stores. At the slightly higher end of the retail market, Macy’s is closing forty stores, which could leave a string of dead malls in its wake. Retail giant Target previously announced it was closing thirteen locations, mainly in the south. The gloom is even affecting businesses seemingly immune from retail shrinkage, like Dunkin’ Donuts, which announced it was closing a hundred locations in October.
The woes of brick and mortar retail go deeper than just the weather. Online sales beat walk-in sales by rising three percent, though still slightly below analyst expectations. Some sectors are feeling the heat from online more than others, like consumer electronics. As behemoth Amazon slashes away at the last hurdles for online sales, consumer aversion to paying shipping costs and delivery delays; and as consumers in turn feel more secure purchasing online, the convenience of shopping at home and having items delivered to the door is becoming more irresistible.
What it Means
If consumers are cutting back at a time when many indicators say they should be spending, it’s likely because they still remember the bad, not-so-long-ago days of 2008-2009 and with every day bringing news of more layoffs no one wants to get caught by surprise by a pink slip. Consumers are also becoming cautious about taking on new debt. Consumer debt numbers are always frightening but, compared to historical trends, we’re actually keeping our credit cards holstered more than we have in the past.
American consumers are showing uncharacteristic caution; an ebbing of our normal shop-till-you-drop high spirits that dovetails eerily with escalating warnings from high-level experts that 2016 is going to be an ugly, bumpy ride.
Trevor Gerszt, America’s Gold IRA Expert, is founder and CEO of Goldco Precious Metals, a privately held retirement services firm in Los Angeles specializing in wealth and asset protection. Trevor also holds a position on the Los Angeles Board of the Better Business Bureau.