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Antsy consumers prompt weak corporate results
Customers leave a Starbucks Coffee store in San Francisco, Calif. As companies miss their sales targets, more are citing weak consumer confidence as the reason for lower expected profits this year.
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Kai Ryssdal: Coke. McDonald's. Procter and Gamble. And, I don't know -- Apple, just for good measure.
I'll give you a dollar if you can guess what they've got in common.
All right, here's a hint. It's about corporate profits. Revenue, more specifically. All four of 'em missed revenue expectations this past quarter. Which is -- in that twisted way business news goes -- your fault.
Which might well be part of a much bigger economic problem. From New York, Marketplace's Mark Garrison reports.
Mark Garrison: Starbucks blames you for its troubles. Not you personally, but the consumer. Its CEO says the slowdown in café traffic is partly because of weak consumer confidence. That number has dipped recently and consumer spending stayed roughly flat.
Economist Chris Christopher of IHS Global Insight says this environment is especially hard for companies occupying the middle market. Take restaurants.
Chris Christopher: Places that are not doing particularly well are some mid-tier restaurants, because people don’t want to pay that extra buck.
Cheap fast food places are largely doing well. And fancy joints with $40 entrees are also OK. He’s talking about one of those bar and grill chains, where they serve vaguely Southwestern fare and give you a pager to tell when your table’s ready. The wait’s not as long lately. Here’s a Chili’s ad fighting the trend.
Ad: The $20 dinner for two, now part of our menu, all day, every day.
Chili’s is moving the price down into the low-end, to let you know you can afford cheese fries and a Quesadilla Explosion Salad. And yes, that’s an actual menu item. If it sells, more tips line the servers’ pockets and they’ll spend a few dollars more somewhere. Maybe the money goes to the company you work for, fattening your wallet.
That’s the hope, but forecaster Jim O'Sullivan of High Frequency Economics doesn’t see consumer spending or confidence rising soon.
Jim O'Sullivan: Unfortunately, there’s probably not going to be a lot of change in the numbers over the next four to five months.
Until consumers feel better about the economy, more companies will struggle, possibly even the one that signs your paycheck.
In New York, I'm Mark Garrison for Marketplace.
Of course consumer confidence is down. Roughly 75% of Americans can't be bothered to fully understand the nuances of our/their ecomom
y and rely on shows like this to give them an idea of how things are going. With the general media reacting like Chicken Little to every breath from Europe, spastic reporting that sells fox news-like news alerts as real information, people are just tired of it all. Some media watchdog, or perhaps some economics doctoral student, needs to map the changes in media bias to consumer confidence over the past few years. They might find that our recession has been prolonged unnecessarily.
The consumer does not have any spending money. What with day care and saving for college,retirement,and health insurance who has money for starbucks? Have you notice the looks like 2 pound container of Maxwell House coffee is down to 28 ounces? How much is a gallon of milk. Not to mention the continued shrinking paycheck. People need to have money in order to spend money.If you want consumers to spend money,go see the men on Wall Street who clear cut this economy. Confidence have nothing to do with the reality of the cash in my wallet.
Agree. It’s not a lack of consumer confidence; it’s a lack of business confidence. Businesses are hoarding cash instead of paying raises to employees to be able to spend. In my own company raises have not been given since 2009, and even then our VP said it was a “mistake.” So saddled with bills, increasing debt, food and medical insurance costs, there’s very little left to spend. If businesses resumed providing the consumer with more income, the whole economy would be better off. It’s a mistake to believe middle class consumers are saving their cash for a better day. Just to be able to do that would be a luxury in itself.
I wonder if part of the reason the consumer is spending so weakly is that the consumer is saturated. I am not talking about Starbucks, but big ticket items. We can't expect people with lower incomes to spend more, they are spending everything they make. But the middle and upper middle class seem to already have nice houses, nice cars, laptops, smart phones, big screen TVs. If we need the consumer to buy more things, just what more things are they going to buy?
