Send this article by email

Yes, the Government stimulus checks are hitting mailboxes from coast to coast in the hope that everybody will rush out and buy non essential items. The retail industry has been suffering from the recession… yes, the recession. The recession that many in the media claim will never happen.

The market has been trading on the premise that the economy will rebound starting in the second quarter of this year and retail sales would jump right back up again. But, as we know from trend analysis, the discretionary spending has been trending downward for  many years. Now we are faced with a recession of the likes not seen in many decades. The collapse of the housing bubble has removed the one last source of income people have to tap. And that is becoming evident in the ominous credit statistics released last week. Debt being put onto credit cards has risen at a rate that is similar to the decline in the housing market. Does not take a rocket scientist to see the connection here. Declines in the housing ATM machine have led to buying for more and more essentials on credit cards. And at a time when banks are already experiencing rising defaults on consumer loans. And rapidly rising inflation.

So where is that big fat check (cough cough) going to go? Paying for food and gasoline is what. So much for the $160 Billion dollar stimulus package, it will just get burned up in the gas tanks all across America. Where does this leave the retailers who were anxious to see customers come in any buy TV’s, iPods, fashion clothes, etc.? It leaves them right where they started, waiting.

Rising inflation, (you know, the inflation that the Federal Reserve had been saying for months is "contained") is creating a squeeze on the average consumers that more and more are unable to keep up with. Banks have substantially reduced the amount of loans they are providing, further cutting people off from much need money. Even credit cards are being cut down with credit limits being lowered and interest rates raised. Where does the average consumer get a break? No where. But, the Government is telling the American people that growth will return and the fundamentals of the economy are sound. Both statements could not be any further from the truth. My observations suggest to me that the 2nd quarter is going to be worse for the retail sector, which will bring down the economy further as 71% of the nations GDP is dependent on the consumer.