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Chicago - From lattes at Starbucks to clothing at Wal-Mart, US consumers are showing signs of lethargy and have retreated from their free-spending ways.
"I don't know if they're dead, but they certainly are on life support," Carl Steidtmann, chief economist with Deloitte Services, said of the more liberal-spending consumer, which in the past had led the boom in the US economy.
But as the housing market decline moves into its second year, energy prices continue to be high and food prices jump, the consumer could actually be a drag on the US economy.
"Now the consumer makes up about 70 per cent of all GDP growth," Steidtmann said. "If that goes from a factor that is boosting growth to one that is [hurting] growth, that could very clearly be a factor that could lead to a recession."
Wal-Mart Stores yesterday reported lower-than-expected second-quarter profit and said sales at US stores open at least a year rose only 1.9 per cent.
"It's no secret that many customers are running out of money toward the end of the month, said Lee Scott, chief executive of the world's largest retailer.
The company, which has more than 127 million customers in the United States alone every week, also said shoppers were spending more on lower-margin items such as food and eschewing higher-margin goods such as apparel.
Sixty-five per cent of US shoppers said they experienced significant price increases in their local supermarket, causing them to spend at least US$8 ($10.95) to US$20 more a week on groceries, said Britt Beemer, chairman of America's Research Group, citing a survey the group conducted in July. But it isn't just the Wal-Mart consumer who is being hurt.
Sears Holdings said on Monday that sales at US Sears stores open at least a year fell 4.3 per cent in its second quarter, with Kmart sales down 3.8 per cent.
Meanwhile, Home Depot has been hammered by the slumping US housing market and posted a 15 per cent fall in second-quarter profit yesterday. David Rosenberg, an economist at Merrill Lynch, pointed out that car sales have fallen for a record seven months in a row. "There are plenty of signs now suggesting that we may be in the early stages of a consumer-led recession for the first time in 17 years," Rosenberg said.
- Reuters
