Seen Declining in February: U.S. Economy Preview [Gloom Alert]

Bloomber News ^ | March 9, 2003 | Vince Golle and Alex Tanzi

[Fractal Trader]

Consumer spending fell in February for a second straight month as retailer discounts failed to attract shoppers strapped by higher energy bills and worried about war, reports this week are expected to show.

Retail sales declined 0.5 percent after a 0.9 percent slump in January, economists in a Bloomberg News survey said the Commerce Department will probably report Thursday. That would mark the first back-to-back decrease since the end of 2001.

[Fractal Trader]

I designed the price discount software to manage an entire retailer's product lines. It is just about the only retailer to be recording a gain in sales these days, so I guess I must know a little about the subject.

I would attribute the decline to several factors: the drain from high energy prices, record snowfall keeping shoppers home, and general uncertainty about economic and politico-military trends.

However, I think that there are larger trends at work. Anyone who shops knows that prices change with the seasons. One of the smartest gifts for Christmas is a gift certificate, so that the recipient both has the choice for what to purchase and can usually get a substantial post-Christmas discount.

Most retailers have fiscal years that begin February first, so most items, especially "fashion" items will be priced for clearance in the end of January for smart shoppers who are not so eager to get the latest trends at the earliest dates at a great discount.

Also, web retailing and auction sites like Ebay put price pressure on retailers. People can compare prices and find the latest deals at places like Fat Wallet. Personally, I intend to buy all computer hardware from reputable vendors on Ebay, with average discounts of up to 50 per cent from retail for brand new items shrink wrapped with a full warranty.

There is another side to this picture. Since GNP is still growing, and using the elementary equation that GNP=Consumption + Investment+Exports-Imports, and since we also know that the trade deficit is high and rising, this implies that the growth we are witnessing in coming in spades in the Investment sector. People and corporations are choosing to invest rather than spend.

Should they choose to save and invest wisely, this could augur well for the economy in the long run.

[Fractal Trader]

Free Republic Stock Market/Economy Discussion List. Freep Mail me if you want on or off this list.

[Jim Noble]

Consumer spending fell in 1942, also.

So what?

[CrimeOf73]

There is another side to this picture. Since GNP is still growing, and using the elementary equation that GNP=Consumption + Investment+Exports-Imports, and since we also know that the trade deficit is high and rising, this implies that the growth we are witnessing in coming in spades in the Investment sector. People and corporations are choosing to invest rather than spend.

Well, according to the BEA's NIPA Table 1.2 (here), the largest component of real GDP growth from Q4-2001 to Q4-2002 was the $170.1 billion increase in personal consumption expenditures. Furthermore, non-residential fixed investment actually dropped by $20.3 billion (1.7%) over the same period.

[Huck]

war jitters

I have never met a single person who chose not to buy something because of "war jitters." This is total bunk. I daresay most Americans expect a war in Iraq to last about 1/50th the amount of time it has taken to get it on.

And another thing, when consumers are spending, they do so on credit, and people complain that this is bad for the economy, having so many folks in debt. Well, now they aren't spending, so maybe they are saving a little more, and that's bad, too. Just can't win. Good thing I just go about my business and do what I am going to do. I spent 3000 on equipment for a new small business today. Yippee.

[CrimeOf73]

I spent 3000 on equipment for a new small business today.

Congratulations! Hope it works out.

[B4Ranch]

Please, take all blinders off, open both eyes wide, practice turning your head side to side to get a full view of what's happening, then read this link. When you have done so, tell me if you feel in ten years the US will still be a superpower.

[MonroeDNA]

Quit spamming threads with your same exact sentences.

[MonroeDNA]

There's a tiny handful of posters here, led by Willie Green and sarcasm, that love to post bad economic news. They have a hidden agenda.

They hate free markets, and love unions. What does that make them?

Marxists.

[sarcasm]

Your comment makes you a liar.

[MonroeDNA]

And why is that?

[MonroeDNA]

How do you feel about unions?

[MonroeDNA]

How do you feel about free trade?

[B4Ranch]

When the same sentence(s) is/are applicable in other threads, I will use it whether you like it or not.

[sarcasm]

Your modus operandi - contribute nothing but personal attacks.

[MonroeDNA]

Thanks for being so clear.

[MonroeDNA]

Answer the questions, if you can.

[MonroeDNA]

If you want to quote me saying that people who support unions and hate free trade are Marxists, please feel free to do so.

Just spell my name right.

[sarcasm]

It's useless to have a discussion with a liar.

[MonroeDNA]

Please explain, if you can.

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