Economic Update – Spooked by Economy, Consumers Consume Less
- May 14, 2009
The U.S. Department of Commerce reported that retail sales dropped by 0.4 percent in April, compared with the previous month. The decline was a little more than expected, but less than the revised March drop of 1.3 percent. The recent two months of decline followed unexpected increases in consumer spending in January and February. Gasoline sales, which sagged 2.3 percent in April as gas prices rose somewhat (and reminded drivers of the gas-price bubble of last summer), accounted for a fair chunk of the total decline. But for gas sales, the overall decline in retail sales would have been 0.2 percent in April. Sales were also down at clothing stores (0.5 percent), food stores (1 percent), and electronic stores (2.8 percent). Drug stores and the like eked out a 0.4 percent increase, and restaurants and other eateries saw a 0.2 percent increase. Concurrent with the retail sales drop, Commerce reported that U.S. business inventories fell 1 percent in March, but nevertheless the inventory-to-sales ratio among U.S. businesses remained high–1.44–because both sales to consumers and business-to-business sales shrank so much. The inventory-to-sales ratio was 1.28 this time last year. Retail Forward, a Columbus, Ohio-based consultancy, posited that there’s been a change in the way shoppers shop, women in particular, at least for now. According to a recent survey by the company, eight of 10 women have changed the way they shop for clothing, accessories and shoes. Respondents said they are both cutting the amount they buy, and “trading down” in terms of brands. “The largest shares of female shoppers are engaging in ways to limit spending,” said Kelly Tackett, senior consultant at the company and author of the report. She added that among the behavioral shifts among women shoppers, the one most likely to persist after the recession ends will be trading down, which, if true, would represent a signal change from recent years. On the other hand, two-thirds of those women surveyed–it was a group of women in about 4,000 households nationally–expected that retail penny-pinching strategies not to be permanent. However, the length and depth of the recession, which is still an open question, could conceivably move more shoppers into a more permanent budget mentality. This year’s response to job-loss nervousness and cut credit lines could echo down the years. According to RealtyTrac, home foreclosures reached 342,000 nationwide in April, representing those homeowners who have received notices of default, auction notices or whose houses are undergoing repossession. The total was up 1 percent from March, and was 32 percent more than in April 2008. California accounted for some 96,560 of these filings, and the usual-suspect states of Nevada, Arizona and Florida also saw a lot of this kind of thing in April. But there are foreclosures in plenty of other places as well, such as Michigan, Ohio, Georgia and Texas. Metro Las Vegas is still tops in foreclosures among metro areas, with 14,000 in April, or one out of every 56 houses. After weeks of boldly going into positive territory, the equity indices have decided to skedaddle back down again, at least for now. The Dow Jones Industrial Average lost 184.22 points on Wednesday, or 2.18 percent, while the S&P 500 lost 2.69 percent and the Nasdaq retreated 3.01 percent.