The old American mall mantra, "shop until you drop," has reached its inherent conclusion. The shoppers have dropped. I first visited this issue last February in my article The Little Engine That Can't, and explained how rising unemployment, contracting credit and loss of home equity--let alone the home itself--would basically kill consumption in the Main Street economy. And so it is.
Last Christmas shopping season was one of the worst in decades. Now the much hoped for "Back to School" shopping has failed to show in the malls. Families and households are simply too cash strapped to indulge in the new laptop and a new wardrobe for their student herd this year. The Wall Street Journal reported: "Discounter Target Corp. reported that sales at stores open at least a year were down 6.2% from a year earlier in the quarter ended Aug. 1, while luxury purveyor Saks Inc. reported a 15.5% drop in same-store sales over the past quarter as shoppers stuck to buying basics. Building-supply chain Home Depot Inc. saw total sales drop 9.1% in the quarter ending Aug. 2, and it reaffirmed expectations of a 9% sales drop this year."
And retailers are not optimistic that the traditional Black Friday buying binge and Christmas sales will reverse this trend. This Christmas will most likely see another sharp decline in sales after a year of heavy job loss and further erosion in home values--let alone the fact that millions of people have seen their credit lines cut or simply had their accounts closed by the banks. We were a nation accustomed to spending 125% of annual income each year--the extra 25% using OPM--other people's money in the form of credit and loans. With bank lending down in record setting levels, credit tighter than ever, jobs vanishing, incomes shrinking, the fabled American shopper has finally been decked, and may be down for the count.
Even though deflation is pushing down prices people continue to spend only for necessities and try to save as much as they can. They are deep in debt and struggling just to meet their minimum payments while paying the bills each month. Here is the chart the Wall Street Journal used to illustrate the problem:
Last Christmas shopping season was one of the worst in decades. Now the much hoped for "Back to School" shopping has failed to show in the malls. Families and households are simply too cash strapped to indulge in the new laptop and a new wardrobe for their student herd this year. The Wall Street Journal reported: "Discounter Target Corp. reported that sales at stores open at least a year were down 6.2% from a year earlier in the quarter ended Aug. 1, while luxury purveyor Saks Inc. reported a 15.5% drop in same-store sales over the past quarter as shoppers stuck to buying basics. Building-supply chain Home Depot Inc. saw total sales drop 9.1% in the quarter ending Aug. 2, and it reaffirmed expectations of a 9% sales drop this year."
And retailers are not optimistic that the traditional Black Friday buying binge and Christmas sales will reverse this trend. This Christmas will most likely see another sharp decline in sales after a year of heavy job loss and further erosion in home values--let alone the fact that millions of people have seen their credit lines cut or simply had their accounts closed by the banks. We were a nation accustomed to spending 125% of annual income each year--the extra 25% using OPM--other people's money in the form of credit and loans. With bank lending down in record setting levels, credit tighter than ever, jobs vanishing, incomes shrinking, the fabled American shopper has finally been decked, and may be down for the count.
Even though deflation is pushing down prices people continue to spend only for necessities and try to save as much as they can. They are deep in debt and struggling just to meet their minimum payments while paying the bills each month. Here is the chart the Wall Street Journal used to illustrate the problem:
