The Associated Press is out with a report titled Summer looks like a washout for some retailers.
While we need to avoid hindsight bias which would make us accentuate the negative because of the recent past, and thus we may look past the intro comments, some observations buried deep in the article are disquieting:
As consumers get ready to celebrate July Fourth, many merchants already have dismissed summer as a washout.
Macy's flagship store has racks of summer tops, swimwear and dresses marked down as much as 50 percent, while luxury retailer Bergdorf Goodman is slashing prices on designer goods by as much as 70 percent. Meanwhile, piles of clothing as well as barbecue grills, tents and gardening tools are bypassing stores and heading straight to liquidators as merchants try to conserve their cash. . .
Friday's government economic reports weren't comforting to merchants, showing that households used most of their government stimulus payments to boost savings to the highest level in more than 15 years in May, instead of splurging at the mall.
"There was a lot of hope with the surge in confidence," said Dennis Jacobe, Gallup's chief economist. He added that consumers were convinced that the second half would be better but he noted, "you can live on that hope for only so long."
According to a Gallup Poll survey of 1,000 consumers taken June 15-21, confidence has faltered as stocks have stumbled and gas prices have risen. He added that he's seen a deterioration in June sales from May.
Michael P. Niemira, chief economist at the International Council of Shopping Centers, estimated that June's same-stores sales have so far registered a 6 percent drop, worse than the projected 5 percent decline and May's 4.6 percent decrease. The figures exclude results from Wal-Mart, which no longer releases monthly numbers. Same-store sales, or sales at stores open at least a year, are considered a key measure of retailers' health.
Niemira says he isn't reducing his forecast yet because he believes the true test will come when the weather warms up.
Could the Obama tax cut/transfer payments be producing the same minimal economic effects as did the 2008 tax cut?
It would appear that the Feds have borrowed a lot of money for it to have almost completely ended up in the bank. This is a clever form of bank recapitalization, but not what the alleged purpose of the tax cuts and increased transfer payments was.
As stated here before, the economy needed a rest after a period of frenzied activity that we have learned was goosed by record amounts of leverage (borrowed money). Economic activity will return at its own pace as real human needs and desires are satisfied. Government "stimulus" has once again proven useless.
Copyright (C) Long Lake LLC 2009