What This Week’s Numbers Revealed: Pessimism Rises as Prices and Spending Drop
by Christina Lee on December 12th, 2008
A collective analysis of studies released this week paint a revealing, evocative portrait of the nation’s economic environment. As prices drop, spending drops even further, as an opaque cloud of consumer pessimism remains hovering over the nation. But below, amongst all of the downward activity, researchers are searching for that cloud’s silver lining.
On the Ground Below
The Bureau of Labor Statistics, National Retail Federation, and Census Bureau released reports indicating that wholesalers and retailers are still adjusting to the economic climate, as price indexes continued to fall:
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Retail container traffic fell in November for the 16th month in a row. With this finding in mind, the National Retail Federation maintains its hypothesis that 2008 will be the slowest year for traffic since 2004, with a year-to-year decline of 7.1 percent.
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U.S. wholesalers lowered their inventories by 1.1. percent in October, though sales also dropped by 4.1 percent from the previous month, according to a Census Bureau report released Wednesday.
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As reported today, wholesale prices of finished goods dropped by 2.2 percent in November, following monthly declines of 2.8 and 0.4 percents.
The Cloud of Consumer Pessimism
As these prices fell, a few research groups found record retail sale declines last month. The International Council of Shopping Centers even deemed Black Friday and the following weekend’s shopping days a “poor start to the holiday season sales,” as it observed a year-to-year decline of 2.7 percent.
The cause of these sales declines: a hibernating consumer, hiding from any temptations to spend money this holiday season:
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The ABC News Consumer Comfort Index measured record-low levels of confidence for the fifth week in a row, as reported on Tuesday. According to the poll, 92 percent of consumers surveyed said the nation’s economy is in bad shape, while 79 percent of them rated today’s buying climate negatively.
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Perhaps as a result, shopping ranked second only to dining out as one of the top activities consumers planned to decrease, according to a poll by the National Association of Television Program Executives and E-Poll Market Research. About 35 percent of consumers also said they planned to stay local more in their socializing, if not at home. They may also hesitate to buy any gifts full price this holiday season – though they were also willing to splurge on themselves, as Women’s Wear Daily reported.
Attempts to Find a Silver Lining
Meanwhile, researchers are taking such economic and behavioral conditions in mind, in trying to find positive news within it all.
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Some, like MasterCard’s SpendingPulse, traced the origins of rising consumer pessimism back to the ongoing depreciation of petroleum, as wholesale prices for it and petroleum products dropped by 11.2 percent last month.
The research group reported yesterday a 3.8 percent decrease in total retail sales, excluding auto purchases – the biggest month-to-month decline it has ever measured. The caveat: without the rapid decline of gasoline purchases factored in, retail sales growth would have otherwise remained relatively flat. -
In its latest study, the Kauffman Foundation posed to question whether recessions were a good time to start a new business.
The study, examining entrepreneurship up till 1975, did not reveal anything too conclusive, as the research group found a number of other factors that had to be considered. The research group also acknowledged that potential entrepreneurs would be unwilling to leave their jobs to found companies during recessionary periods.
However, when the study excluded the Great Depression and World War II – the most unusual periods of time – the Kaufmann Foundation found that slightly more companies debuted during recession periods than expansion periods.
Overall, this week’s numbers showed that consumer pessimism remains persistent as retailers and wholesalers continued adjusting to the economic environment. Whether such feelings or downturn behavior will fade first, time has yet to tell. But either way, as the next few weeks pass by, and as the new year approaches, new perspectives could perhaps lead to new solutions – or, at the very least, a break in the cloud.