It was curious to see the immediate complacent stock market reaction to the FOMC remarks that the Fed is going to keep rates low for an extended period (although it did crumble right before the close of trading). Yes, the central bank will have a tricky balancing act when it has to mop up liquidity, so there is a lot of hand-wringing about inflation down the road. But the subtext is that the big risk is deflation. And Japan has never had to worry about mopping up liquidity, it had and still has to worry about creating demand.
Some new sightings on the “where have all the consumers gone” front. The Financial Times reports that Americans are cutting back at the grocery store, even on pet food. That tells me that despite the effect of cash for clunkers and a pick-up in luxury spending, the average consumer is belt-tightening, literally and figuratively:
Tights, sunglasses and boneless chickens have joined the list of casualties of America’s economic crisis, as the era of impulse shopping gives way to more wary behaviour in the nation’s grocery aisles.
Americans unwilling to pay extra for their food to be prepared bought $65m more whole frozen chickens in the third quarter than a year earlier, and $50m fewer boneless birds…
“Instant gratification” categories such as sunglasses and tights registered some of the steepest declines…
Men, keen to look sharp in the office as the country faces its highest unemployment rates for a generation but unwilling to spend on the salons that had enjoyed a male grooming mini-boom, bought 28 per cent more hair-care products at grocery and pharmacy chains.
“The old world was about instant gratification, but in the new world consumers are making a shopping list . . . They’re less impulsive,” Ms Thompson said. “Changes in shopping behaviour suggest some new habits may be emerging.”
The complex interchange of financial and emotional impulses is being felt even by the nation’s cats and dogs as consumers traded down from “wet” pet food, but then supplemented their animals’ more basic diets with snacks “so they still feel good about it for their animals”, Ms Thompson said…
A trend away from eating out led to a 70 per cent jump in the number of ice cream cakes sold, as more children’s birthday parties took place at home. Ready-to-eat popcorn purchases were up 55 per cent and sausage dinners up 27 per cent as more evenings were spent in front of the television.
Popcorn and sausage dinners notwithstanding, some Americans remain willing to pay up for a healthier diet. So-called performance drinks, such as protein smoothies and vitamin-enhanced water, were up 67 per cent, or $7m, at the expense of cola sales.
My own data point is I stopped at Whole Foods last night on the way back from visiting a buddy in the hospital, and the lines were long at 9:30 PM. But New York is afloat on TARP funds, and Whole Foods is still cheaper than ordering in.
Another factoid courtesy DoctoRx is that 63% of Americans expect to spend less on holiday presents this year than last year. And remember, last year people had just witnessed the meltdown. More findings:
The Discover U.S. Spending Monitor fell 3.2 points in October to 85.8 (based out of 100). The decline was primarily due to a rising number of consumers concerned about the state of the economy. Overall, 56 percent of consumers rated the economy as poor, a 4-point increase from September. Forty-six percent of consumers felt economic conditions were getting worse, a 3-point rise from September and the first increase reported since July.
Concern over personal finances also rose in October, as 27 percent rated their finances as poor, a 4-point increase from September. Forty-nine percent felt their finances were getting worse, a 1-point increase from September.
The decline in economic and financial confidence was greatest among women, which may be a concern for retailers heading into the holiday shopping season. The Monitor has shown that spending intentions are tied to economic and financial confidence, and so far, numbers suggest consumers, especially women, are anticipating cutting as much if not more of their holiday spending as they did last year . . .
For the seventh straight month, less than a majority of consumers have money left over after paying monthly bills. In October, a Monitor-low 44 percent planned on having money left over, a 3-point drop from September. Furthermore, 41 percent were expecting an added expense or income shortfall in the month ahead, a 3-point rise from last month and the highest since December 2008.
This is a pretty new survey, but the results are far from encouraging.
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Like your Whole Foods experience vs ‘sausage dinners’ for the less well heeled here is another example of what is perhaps John Edwards ‘two Americas’
Advanced services were stronger this quarter than last (463,000 digital video adds, 375,000 VoIP adds, and 361,000 high-speed Internet adds), driven by aggressive “triple play” promotions. About 27 percent of Comcast’s video subs took voice and data, which is up from 22 percent in the year-ago quarter.
But on the down side, Comcast still shed 132,000 basic video subs, better than the 185,000 analysts were expecting the MSO to lose. However, basic video isn’t the only place Comcast is feeling some heat. Comcast COO Steve Burke also warned that Comcast continues to see “a higher percentage of video customers taking lower levels of digital service, which impacts ARPU [average revenue per user].”
“The Monitor has shown that spending intentions are tied to economic and financial confidence,…”
Uhm, my spending intentions are tied to my income. My first priority is to sustain life through purchase of shelter and food. Confidence isn’t the main issue. Confidence only becomes an issue when I decide to take on debt, and then I have to have a positive expectation that I can repay the debt given my current economic circumstances.
Barring the mortgage, I will never take on debt again (and certainly no equity loans) so a confidence factor becomes moot. I never want to enrich another financier again at my own future expense. Life’s too short going around collecting stuff. I now measure my worth, confidence, and expectations by want I don’t own, don’t owe and by the productive use of my leisure time.
So the massive bailout to the TBTF in the Trillions didn’t really help Jack and Jill consumer on Main Street? The purpose was to extend reasonable terms in credit both in mitigating underwater mortgages, massive CC debt, etc. What happened instead was hoarding of dollars and the Federal Reserve paying interest on the loans for those ‘illiquid assets’. The banks used this window of opportunity to further stress already stressed schmucks.
Previous recessions were also job-loss. Its reached entropy. Financial innovation hid the real loss in GDP/production taking 30%+ of the GDP while mfg no accounts for only 10%. In other words, the wizard of wall street thought they could replace real production and jobs with faulty calculus of over-valued/inflated and diced up securities sold worldwide.
Meanwhile, the taxation on Main Street for those fortunate to still have homes and jobs seems to be the only way congress can assess any remedies. While large US corporations avoid taxation through endless means of offshore divisions, we get to pay for their right to fleece us at every turn which includes the municipal bond markets.
The criminality and neglect here is STUNNING.
At the high end, my BOTOX®, filler and laser patients are spending at least as much as ever, and seem to be travelling even more than usual, given the great deals that they can get all over the world.
Lots of people are buying very fine cars, and doing nice renovations and landscaping, because of the excellent prices and terms available to those who are in the market for such things.
My sense it that every day is a blessing, make hay while the sun shines, etc, but at some point it is likely that things will slow down.
A friend of ours is a regional representative for Kraft Foods. This shift in consumer grocery store behavior has been underway for several years. That this is “news” today says more about the F-T’s disconnection from reality in the City of London and Yves’ similar insular position in lower Manhattan.
Other grocery datum points:
1. Lower customer count and higher average sales slips. i.e. people are going to the store less often (to save gas) and buying more on each trip. And doubtless planning their purchases more carefully.
2. A definite trend to less prepared foods.
There is still lots of air left in the consumer eCONomy to deflate. Big savings are available with bulk purchases of grains at the local feed & seed stores. Buying pinto beans, corn meal, whole wheat grains at feed stores and using a small Corona grain mill and a crock pot (for those whose electricity hasn’t been shut off yet) can reduce costs by another 50% and more.
A bottom will be in sight when Wal-Mart starts laying off.
r.e. “Consumer Retrenchment”. As is sometimes noted, the consumer was 70% of the economy. Before any broad-based “recovery” can occur there must be a recovery in consumer spending. E-Z credit appears to be definitively over (unless you are Goldman Sachs). This leaves raising discretionary consumer INCOME as the way to increase consumer spending. i.e. raise the leftover, if any, after taxes, debts and essentials.
So, how are current and prospective policies stacking up against this obvious requirement to raise consumer incomes? Let’s survey some monthly budget items:
1. Health Care. Disguised tax increases hitting the middle class are enroute here as the major part of “reform”. This is what the limitation on health savings accounts means. Presently HSAs are a great way to deduct all co-pays.
2. Fuels & Energy. “Up up and away” is the theme here.
http://www.youtube.com/watch?v=iWVe3AB8OY8
Listen a bit to your typical Anthropogenic Global Warming cultist expound on the subject. Puddles of drool swiftly form at their feet as they wax on about raising prices any which way they can. These cost increases will flow through to the consumer, with appropriate offsets and subsidies for politically favored groups.
And there is the second source of fuel price increases from the exchange rate decay of the dollar.
3. “Higher” Education. Suffice it to say, lower out of pocket student/family costs are not on the Government-Academic complex’s agenda.
4. And consumer *incomes* are still headed which way? North or south?
http://features.csmonitor.com/economyrebuild/2009/10/30/americans-income-and-spending-drop-despite-stimulus/
Households are depending on transfer payments from the government just to stay even,” economists at the investment firm Goldman Sachs wrote in an analysis of the report. “While the downward momentum [in wages] has abated, it has not turned positive. Meanwhile, income on assets – interest and dividends – continues to drop.”
Rising prices in multiple essential categories and stagnant to falling incomes.
“Listen a bit to your typical Anthropogenic Global Warming cultist expound on the subject. Puddles of drool swiftly form at their feet as they wax on about raising prices any which way they can….”
Quit expelling slime and take on those thousands of climate scientists with fact & research based argument.
How about this: I dare you to go over to realclimate.org and take on the climate scientists. Start here:
http://www.realclimate.org/index.php/archives/2004/12/index/
My experience, sadly, is that economics blogs are rife with scientific troglodytes.
http://www.surfacestations.org/
http://wattsupwiththat.files.wordpress.com/2009/05/surfacestationsreport_spring09.pdf
The datasets used to “prove” AGW are corrupt and cannot be relied on for anything. With 89% of surveyed (1003 of 1221) USHCN stations failing NOAA’s own siting standards this is a simple statement of fact. It is so bad that Global Cooling could be occurring unobserved.
“Real Climate”? Oh yeah. Home of the hockey stick, Michael Mann’s proprietary black box algorithms “proving” AGW and “the debate is over” mentality. And statistical incompetence that doesn’t even rise to a sophomoric level.
http://www.climateaudit.org/pdf/others/07142006_Wegman_Report.pdf
Doubtless the NSF sub-committee chairman for statistics isn’t an authoritative source either.
It would be a very good thing if the consumer retrenched to point of say saving 10% of gross income. The degree of deleveraging necessary to achieve that would be very substantial and that might begin to address the problem of extinguishing all of the debt that cannot be serviced.
It appears the richer folks are boosting the savings rate, while the poor are holding up spending with the help of the government in the form of unemployment benefits – I infer this from an article on Financial Armagedden, where he showed spending had flattened while hours of work continued to drop. With income numbers dropping and savings rate going up, the question he was answering was “why is spending holding up?” Also saw an article on people cashing out 401ks at a higher rate.
“Savings”.
It used to be obvious that a polity cannot “save” overall year to year. So I was taught in economics back in the Dark Ages. That is, you can’t leave a meadow empty for two years and then graze 3x the number of cows on it the third year. Ditto for iron & coal mines, factories, railroad capacity, etc.
“Consumer savings” under this caveman idea was another name for real capital investment in productive plant and infrastruture. Consumer “spending” was foreborn in favor of “spending” on capital investment that would later return a higher “dividend” (or interest).
But we don’t do this now with “savings”. The order of the day is uncreative destruction of capital plant and equipment. Close down, offshore, carbon tax out of existence, you name it.
“Savings” in this case cannot possibly result in expansion of productive plant. We’re destroying this as a matter of public policy. At most “savings” will result in early debt repayment. And this appears to be the new definition.
Spending is holding up because it has dropped all that it can without cutting essentials. So many people were already living quite desperate lives – and that number just keeps growing.
There is pretty much no middle class left, so I’m not sure what blood they will be getting from that stone. And yes, when (not if) fuel prices go up, that will only push what’s left to the margin.
It’s terrible. So much for reform, so much for meaningful stimulus.
There are lots of places left to cut the peons. It’s not necessary for a soccer mommy to drive a minivan to the grocery 14 times a week. Four soccer mommies can car pool to go once a week and save 55 trips.
And we can reduce school bus service, as happened to us this year. Now we have to drive our 8 y/o twice a day. The waiting lines are awesome to behold. No, walking is not an option, not given the general social environment on the streets these daze…
We can further offload the school office supply budget onto parents via the “required student supplies” list. This year’s list included two 500 sheet packs of printer paper, 8 rolls of toilet paper and a 3 pack of paper towels.
These latter two events constitute effective tax increases, without the need for formal “democratic” processes.
People can revert to processing their own grains as I alluded to above. And growing and canning vegetables. Farm prices only represent a small fraction of the sticker price at Walmart…
Mass transit can be implemented far more swiftly than anyone imagines.
Afterwards the Limousine Liberaltards can scratch their heads punditizing whyizzit that young people who voted for Obama didn’t bother coming out to vote Tuesday for still another Goldman Sachs alumnus?
I’ve been posting for a year that I’ve seen these changes: Wal-Mart keeps expanding the food sections. While some prices are lower than the supermarket, they are still not low enough. Former Wal-Mart food buyers are now shopping at Dollar General, which also expanded its food aisles. It took my local supermarkets at least nine months before they finally had real sales. At the same time my utilities keep rising, as do my property and school taxes. I’ve heard the school tax might double to pay for government pensions. The cap is coming off the electric company next year and so electric bills are estimated to rise 50% or more. I just canceled HBO and am going through my movie posters to see what I can sell on eBay. After trolling through eBay for current prices and sales, it appears I will have to sell at a tenth the value to attract a bidder. Previously the country’s resources were up for sale to the highest bidder. Now individuals are following the trend to the bottom. As far as I can see–and experience–there is no recovery, it’s all smoke and mirrors. And if the rest of the country is like me, we might finally get to see the second American Revolution.
Some further ideas on economy.
http://www.kurtsaxon.com/foods000.htm
Note to Yves: I looked up “Whole Foods”. It’s just greenwashing for guilt stricken NYC liberals. Similar to the indulgences the Pope sold prior to the Reformation. A company whose main page emphasizes its use of hydrogen powered forklifts in a warehouse doesn’t have a customer base experiencing any economic stress.
I suggest you stick to analyzing banking malfeasance. You just discredit yourself when you cite something like “Whole Foods” in an attempt to relate to real street experience.
Pot-kettle-black. Whole Foods is a massive chain and an excellent indicator of affluent spending. They now have some wines at Trader Joe’s prices. And, yes, they’re bogus as hell on liberal causes: the ceo had a WSJ op-ed about how employer health care really is a great idea and we should dump Medicare or some such twaddle.
Did you read my post? I said this was an alternative to ordering in for the moneyed classes in a TARP-floated economy, and by implication, not indicative of life among normal folks.
This was the first time bought something at Whole Foods in NYC. Normally I go to them only when on the road, since their salad bars are cheaper than going to a restaurant, and they do have tables so you can eat on premises. And I have to say that before they went national (they were a staple in Santa Fe, where I have friends) they were not as upmarket as they have become.
I think “Sharonsj” would be an excellent consumer correspondent for you. I’ll venture that nearly all NC readers didn’t even know there were further steps down the consumer food chain beyond Wal-Mart Supercenters.
In some ways, the US is following the course it took in the 1930s, when FDR favored unions and business cartels. Both were TBTF. The difference now is that Big Finance was put in its place under FDR but not under the Bushbama Continuity. I’ll take the imperfect leadership of a public-spirited FDR type over the Gordon Gekkos at Big Finance.
Bulls on the stock market often assert that the current rally is the most-hated one in memory/history. Maybe it has something to do with the insane statements made in church settings that Yves documents in the post immediately above (temporally after) this one? And maybe it’s really over-loved, not hated?
In some ways, the US is following the course it took in the 1930s
And in many ways it’s going in reverse. Back in FDR’s time truly progressive projects like western dams (Bonneville Power Administration) and the Tennessee Valley Authority (rural South electrification) were being established. Natural gas pipelines were starting to be run. Real energy costs were falling sharply.
Now the (generally childless) “progressives” want to blow up the dams on behalf of snail darters, tax the natural gas flows, shut down all coal mines and power plants, obstruct any new nuclear plants (see BO’s lawyer pick to head the FERC) and do anything else they can think of to increase fuel and power costs.
Shameless mendacity being the real spirit of our age, this is all accompanied by non-stop lies proclaiming “growth”.
Please just stop posting. Your comments provide no useful information and are only annoying, whiny complaints.
The FT article seems to think that wet dog food is inherently higher end than dry dog food. As someone who has done a lot of work on this industry, I can say that the distinction is not so clear cut. Dry food is actually better for dogs in many ways (dental health, breath, etc), especially for larger breeds. I personally fork over $50 a bag for venison and sweet potato dry dog food for my allergic pup.
The trends in pet food, today and for some time, have been the growth of premium and private label products at the expense of mid-range branded food. Premium has consistently been the fastest growing segment of the market, and pet spending continues to be strong overall (APPA shows spending up to $45.4B from $41.2B in 2007, driven by food and services).
Its been reported lately that Congress would like to “speed up” rules about new credit card laws.After the banks have already raised everyones rates.What they need to do is make banks back-peddle and undo all the rate hikes.Our family has just seen an extra 250.00 a month tacked onto our payments for no reason,and I’m saving every extra dime I have to pay these bloodsuckers off.So my consumption is as nil as I can make it.I’ll bet others are doing the same.Great for the recovery eh?
Grocery data point report from Brooklyn NYC, where the TARP funds do not reach: my local grocery store (where Notorious B.I.G. worked as a bag boy) is absolutely booming. I think it was a perfect storm of their responsiveness to the gentrifying community (organic food etc) and the new need to eat in – they have good sales, good produce, really cleaned up their act. For most of my own groceries however I divide my money between Trader Joes and Sahadis (for those who do not live in Brooklyn, it is a 60yr old Lebanese grocery store that sells food in bulk – grains, beans, rice, nuts – at fantastic prices).
Real NYers are actually very cheap people. Having grown up here in the 70s I have fallen back on the strategies I learned then: comparison shop in all neighborhoods, travel an hour by subway for an afternoon of shopping in an ethnic neighborhood, etc.
As someone above said, my first priority goes to food and shelter, and I have very little left over after that. Fortunately I never quite recovered from my 70s thrifty NYer mentality, even while everyone around me seemed to be losing their mind.