Unconvinced - consumers don't believe in recovery
Shoppers exit a Prada store in Hong Kong on June 7, 2011.
Today's retail sales figures suggest the American consumer needs to be persuaded to participate in an economic recovery. Sales were flat in August, and July figures were revised downward.
We spoke with retail analyst and real estate dealer Faith Hope Consolo; she said consumers see plenty of problems with the economy, all of which are affecting confidence and, by extension, consumption. There's ongoing turmoil in the housing market, volatility in the stock market, the uncertainty about Europe, the political dysfunction in the U.S. Pick any one of these, or lump 'em together, and you get consumers too worried to opening up their wallets. And underlying all the worry is the seemingly bottomless fear Americans feel about losing their job.
Consolo said that, while consumers are still buying things like small electronics, other staples such as apparel and big ticket items like cars are suffering. She said that the "Back to school" season disappointed retailers. Part of this can be blamed on the weather - Hurricane Irene shutting down the East Coast - but it also seems like the American consumer did something it rarely does: it skimped on the kids. And to lure the shoppers into stores, retailers were forced into more discounting than they would have liked.
Consolo pointed to one bright spot: the luxury market. She said that this small percentage of American consumers is doing fine - agreeing that this again points to growing income inequality in the U.S. - but she says even the rich consumer has changed behavior. Where this shopper would have bought several pairs of shoes on one trip to the store, now he or she only buys one or two. And those trips to the store are occurring once a month these days, instead of once a week.
Oh don't get us wrong; we're not asking you to feel sorry for the person who only buys one pair of Manolo Blahniks at Bergdorf Goodman, but it does point out that the Great Recession changed consumer behavior everywhere from the bottom rung of the ladder all the way up to the top.
Also on the show, a new survey shows that about a third of existing iPhone users say they will upgrade to the new iPhone 5, even though Apple hasn't even announced that there will be an iPhone 5. The news that American consumers are preparing to splash out hundreds of dollars on something that doesn't even exist yet is making us feel a lot better about the economy sending the Marketplace Daily Pulse racing today.