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The failure of the American consumer

Posted Oct 15 2008, 03:42 PM by Anthony Mirhaydari
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We're witnessing an epic demise of the American consumer. For the month of September, retail sales fell 1.2% -- the largest sales drop in three years and the third consecutive monthly decline.

The decline was lead by auto sales (down 3.8%), furniture (down 2.3%), and clothing (down 2.3%). The result was double the consensus estimate and brought the annual retail sales growth into negative territory with a 1% decline.

It looks like the situation is deteriorating quickly. Consider additional insight from Philippa Dunne and Doug Henwood of the Liscio Report. A few of their contacts remarked that sales tax receipts are "currently falling more sharply than they have in prior recessions (and from already recessionary levels), and comparisons continue to be to the 1990-91 recession, not 2001's more mild slump."

Another interesting observation is how growth in the International Council of Shopping Centers' sales categories have changed since retail sales peaked in 2006. Luxury stores have gone from year-over-year comparable store sales growth of nearly 7% to a negative 11% reading for September -- a swing of nearly 18%. Department and apparel stores have shown similar shifts. Meanwhile, discount stores and wholesalers remain buoyant. Obviously, a great consumer retrenchment is underway.

What's worrying is that we still don't know how the recent market sell-off affected consumer spending. Based on work by the ISI Group in New York, things are likely to get much worse as we enter the critical holiday shopping season.

If stocks stay at currently depressed levels, the market component of consumers' wealth would be down nearly 36% year-over-year. When combined with an estimated 7.4% fall in house prices, this could drive total consumer net worth down by a record 13.5% for the fourth quarter. Such a hit to consumer wealth would cut total economic growth by 1.3%. Such a decline would help drive unemployment from the current 6.1% reading to ISI's dour 8.5% estimate as consumer spending dries up further.

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Comments

 

It is sad that our Directors of Companies allow the CEO's to draw a bonus when they have lost money.  I say NO BONUS until the company makes more money this year than they made last year and other than a Bonus, deduct from their Millioin Plus Salary the same percentage of loss the Componay lost over last year, & make them pay their own Golf Fees.  I have not voted for a Director since I got Enronized, Worldcommunized and Lucenized form the last crooked dealings of CEO's.  This time I got AIGized for 75,000 down to 2500.00.  I am fed up with the hand picked Director set up.  I know our Congress is not going to take notice of this but  I believe they could do something for the common people, instead of turning their heads from this situation.

We live across the street from a group home.  The government pays a privatre business to care for these residents, who are disabled in one way or another.  We figured out that each one of these four residents  cost the taxpayers at least one hundred and fifty thousand dollars a year.  The home is staffed twenty four hours a day, and usually three staff members are present.  PLus the cost of the home, utilities, upkeep, medical care, lawn care, transportation, food, paying the  office staff of the company, etc. etc.  etc.  You get the idea.   So around twelve thousand a month OR MORE for EACH of these people.  And these group homes are all over .  (They took these people out of institutions to place them in group homes, which cost a heck of a lot more.)   But when I think of how much the government leaves my husband and me to live on, compared to these people in group homes, it makes me angry.  Plus we have to pay work expenses, gas, car expenses, and health insurance and medical bills, etc. etc. etc.  It is appalling how much those of us who work have left after we get up five days a week to go to work. And then , we cant even deduct our work expenses!!  People in group homes cost about five hundred to a thousand dollars a DAY  and we have MAYBE  a hundred dollars a day for BOTH of us!!  And that is ok??!!  Now, I am not saying that we should not take care of these people, but it doesnt have to cost so much.  The country and states cannot afford it.  Plus , shouldnt their families have at least some responsibility?  The working people in this country are getting ripped off big time.  You work so hard and long and get so little in the end.  They whine about the senior citizens and the public assistance people being on a fixed income.  Well, you know what , many of the working people are on a DECLINING  income, we keep losing hours and also not getting raises at all sometimes.  Even the Social Security people get a better raise than us, and They dont "lose hours ' every week like we do, when we have a lack of work.  Everything everything is SO out of balence.

The problem is that consumers are not able to get a piece of the cashflow from corporations. Its ironic that consumers are the ones responsible for the successes of corporations but are not able to get the benefits of making the corporation a success. Here's a blog on this topic -  http://blog.myfinancesblog.com - read the one titled "Consumers of the world, unite"

The Fatcat is getting fatter and we as people giving to them ,we need to cut and ,stick it them?,,because,it will come back and bit  them in the ass.thank you,richie

The media is only reporting doom and gloom for political reasons....to make the current administration look as bad as possible.  I agree that things are rough, and probably going to get worse.  The 700 Billion dollar bailout was a HUGE mistake, but it added fuel to the fire.  You all can add higher taxes to our money woes as well.  After the election if the  candidate wins as deemed worthy by the press, the headlines will start reporting more positivily.  However, if the other candidate wins, we can expect more doom and gloom, probably for 4 more years at least, regardless of what is really happening out there.

Look for positive things in your life everyday.  Otherwise, the government and media will suck the life right out of you.  

This is a no-win situation for all of us....if we all cut back and save now  what  little money many of us have jobs will go away faster.  Because we are an economy that is based on "consuming" 70% of the jobs are in jeopardy right now.  Americans have to learn to think for themselves and not follow a "pack" mentality.  Believe it or not there are people who have not spent themselves into oblivion, purchased homes they could afford, diversified their retirements, saved CASH, got a practical education with a future and kept an emergency fund.  It may have not been "sexy" but it sure has paid off.  But like I said above, it is now a Catch-22.  For so many years this economy has been driven by irresponsibility. It  will be tough times to change.  God forbid the government gets involved as they always make things worse...the Great Depression lasted much longer because of government intervention...looks like we are in for more of the same.

You can find all the answers to your questions within Zeitgeist -- the first one explains the corruption -- the second one explains the economic crisis

http://www.zeitgeistmovie.com/

To encourage all that money sitting in insured bank accounts be put to productive use, an incremental tax on amounts over a certain figure should be imposed to help pay for all the risk and expenses involved in insuring these non productive assets. It is all the small investors( including 410K savers) who have been saving steadily over the years, making sacrifices and delaying gratification, who are being the most punished. They are being left to the mercy of the consequences of all the fat cats who are bailing out of the stock market ( yes! the same ones who helped cause this disaster )

If all the bank account holders saw it was in their economic interest to put their cash to more profitable use, it would be a definite plus to the economy

Everyone commenting here really needs to wake up. Both the democrats and the republicans in public office not all but a very large percentage of them do not care about the general public, they care about what they can get. Can't you all see that?

I do not know how to get them out of office but that is going to be what it takes to stop the abuses to the pubic in general. We need to replace every politician who does not do as we request for example The 750 Billion $ Bail Out.    Hundreds of thousands of emails were sent to our representatives saying do not approve the Bail Out and our so called representatives did not represent us. There has been well over 2 trillion pumped into the banks wordwide and we are worse today then before we all got 750 billion in the red, actually it's more like 1.2 Trillion or better in the US  just go back 10 months and add up all the bailouts it ain't 750 Billion.I just wish the People of the US would figure out a way to get to gether and replace majority of our so called representatives because they are very dishonest and they don't care about the people because if they did 1. They would not have instigated the lending practices that got us here, 2.They would not have sat on their hands for 8 years or close to that 3. Wnen it all goes south steal over a trillion from us to fix the problem which is not fixed but they got the cash.

America must be blind and deaf.

Wow, heaven forbid that people stop buying crap they don't need; how dare they!  Why have an economy based on production and growth when we can just resell overpriced houses and other inflated assests to each other?

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