Consumer spending boom?

Apparently someone forgot to tell Wal-Mart, which accounts for about 7% of total nonautomotive consumer spending nationally, about the great economic news that is supposed to have transformed the political landscape.

At least, that’s the impression you’d get from this Reuters story.

Economists and politicians giddy about prospects for U.S. economic growth got a dousing of cold water on Thursday from Wal-Mart Stores Inc. (nyse: WMT – news – people), the world’s largest company.

The retailer — which taps directly into the psyche of the U.S. consumer — gave a downbeat economic outlook that contrasted with reams of recent data, and bluntly suggested that many of its shoppers are barely making ends meet.

Customers continue to buy the cheapest items in any given category — a sign that household budgets remain tight, Lee Scott, Wal-Mart chief executive officer, said on a recorded message.

Buyers are “timing their expenditures around the receipt of their paychecks, indicating liquidity issues,” Scott said.

“I don’t think consumer spending is slowing, but I also don’t see the strength that many of you in the investment community appear to see,” Scott said.


“The Wal-Mart numbers leave open the question ‘is this just a breather in consumer spending or is it the start of the long-awaited consumer spending recession?'” said Cary Leahey, senior U.S. economist at Deutsche Bank Securities.

Wal-Mart’s portrayal of financially strapped consumers highlighted worries about how spending would hold up once midyear federal tax stimulus — chiefly, from child tax credits — waned.

Spending growth had been expected to slow after third-quarter growth of more than 6 percent, but by how much?

Shoppers’ caution will probably continue until there is further improvement in employment, Wal-Mart’s Scott said.

U.S. employers have added 286,000 workers to their payrolls over the last three months, the best three-month performance since before the economy entered recession in 2001. But the new jobs may not be an equal exchange for those being lost in terms of wages and benefits.

Actually, that first paragraph isn’t right. Most of the economists (and stock traders) weren’t giddy in the first place, and most of the politicians (including political journalists, including bloggers) won’t even bother to notice a fact that contradicts their spin.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

One thought on “Consumer spending boom?”

  1. Wal-Mart, the Economy, and the Many Manifestations of Spin

    Brad DeLong, Kevin Drum, and Mark Kleiman point out that Wal-Mart has, according to a Reuters dispatch, "dump[ed] cold water on U.S. economic bulls."

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