Consumer spending is showing signs of flagging in the US, where shoppers are opting for discount stores and cutting spending on non-essentials as the effect of federal tax rebates begins to fade.
The first retail sales figures available for last month have been disappointing, analysts said, noting that consumer spending normally accounts for two-thirds of US economic growth.
On Thursday, the International Council of Shopping Centers (ICSC) said that sales at chain stores such as Wal-Mart and The Gap rose 2.6 percent last month. The gain was in line with expectations; the ICSC had forecast a rise of between 2 percent and 3 percent.
The details of the ICSC report revealed a striking disparity between the discount chains and stores selling goods not strictly seen as basic necessities.
Although Wal-Mart, the world’s largest retailer, managed a rise of 3 percent in US sales last month, elsewhere the performance was on the red side of the ledger: Clothing stores saw their sales plunge 5.5 percent, furniture stores 10 percent and department stores 5.7 percent.
The numbers were even more disappointing because of the local tax-free shopping days last month promoted by a number of states to stimulate spending.
The sales report gave fresh impetus to economic concerns spurred by the automobile sector, which announced last week that sales last month had dropped 13.2 percent from a year ago.
Wal-Mart gave a simple explanation for its good performance.
The group’s “clear price leadership position continues to meet the needs of our customers in a difficult economy,” said Eduardo Castro-Wright, president and CEO of subsidiary Walmart US.
Consumers are seeing their purchasing power hit by tightening credit on monthly mortgage payments and soaring energy and food prices.
To battle the trend, the federal government launched a stimulus package worth around US$168 billion early in the year that includes tax rebates for tens of thousands of Americans.
But the payoff has been less than expected.
“Tax rebates hardly seem to have had much success to arrest the clear downtrends we observe,” said Robert Brusca, an economist at FAO Economics.
Since April, when the first tax-rebate checks were mailed, no spectacular jump in demand has been noticed and economists think the coming months could only be worse.
“We are worried about the outlook for consumers in the near term,” Deutsche Bank analysts wrote in a client note.
“Household income creation is not keeping pace with inflation, unemployment is poised to further increase through at least year-end and the fiscal stimulus boost to private consumption is on the wane,” they said.
That is a disturbing scenario for economic growth, which rose an annualized 1.9 percent in the second quarter but is in danger of falling by the end of the year.
Many economists forecast the economy will stagnate or even contract in the fourth quarter.
These worries, which have led the Federal Reserve to hold its key short-term interest rate at a low 2 percent, are bolstering the arguments of those calling for a second stimulus plan, despite the feeble impact of the first.
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