Consumers spend less money
Austerity – an alarm signal for the mood in the USA
Many US citizens are currently spending very little money. If Americans, who are otherwise so fond of consumption and debt, buy less, that is an alarm signal for the mood in the country.
American consumers have begun to hold on to their money. But if Americans, who are generally fond of consumption and debt, buy less, that is an alarm signal.
US companies did stock up on international goods before new tariffs made their purchases more expensive. But the warehouses are now empty and fresh imports have to be made at new, significantly higher costs. Clothing manufacturer and retailer Abercrombie & Fitch, which owns the Hollister brand, reports its expensive young fashion business will be hit by $90 million in tariffs this year.
“Tariffs don’t just change imports and exports,” says economics professor Samuel Kortum from Yale University: “The American government deficit is falling, but because prices are rising faster than consumption, American consumers are bearing the economic costs.”
Time to buy and celebrate
America is entering a time of traditional shopping and celebration. The “holiday season” begins this Thursday with Thanksgiving, the American version of Thanksgiving, and continues until New Year’s Day. Family celebrations meet commercial action days, which are often spent with the family.
Millions of employees will take Friday off to stand in line in front of computer and clothing stores on Black Friday. Retailers across the country entice customers with special offers and fresh product lines. Online retail will follow suit on Monday with “Cyber Monday”. In offices between New York and Los Angeles, bosses have to put up with their people spending significant portions of their working hours hunting for bargains on the computer.
Data from analysis firm The Conference Board suggests that private consumption is increasingly being driven by people with high-paying jobs. Broad sections of the population, on the other hand, are avoiding expensive purchases.
Lockdown for the mood
Because of disputes over the state budget, there was a lack of money to pay state employees in the fall. For six weeks, 1.4 million US federal government employees were not paid. The authorities’ standstill (“lockdown”) has weighed on the mood in the country. Many of the beleaguered government employees will need longer to economically digest the period without salary.
Because of the lockdown, there are no official figures on economic development. The state-run Bureau of Economic Analysis has not calculated anything fresh about consumer behavior and inflation. Observers rely on data from individual companies and surveys.
The fashion company Ambercrombie & Fitch recorded seven percent more sales in the financial year so far, but is not expecting any further increase in the Christmas business. Electronics retailer Best Buy expects growth of just one percent for the Christmas quarter. With inflation at around 2.8 percent, that means a step backwards.
Little optimism among consumers
At the end of October, “The Conference Board” was pessimistic about the future. Americans’ expectations have fallen again from an already low level.
The index that economists at the University of Michigan use to measure consumer sentiment shows something similar. The decline last registered there is still within the scope of possible measurement errors. In any case, there was no trace of optimism. “Consumers remain disappointed by persistently high prices and weak incomes,” summarizes Joanne Hsu from the University of Michigan.
Permanently weak demand from broad sections of the population is affecting companies in the consumer goods industry. The data company Dow Jones calculates a measure of the stock market returns of 81 large companies that offer goods and services to consumers. The fact that the index is falling significantly this year before the Christmas shopping season is extraordinary. It is currently up a paltry percent compared to the previous year.
