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.
