Santa's on the 'cliff'
The holiday season started even earlier this year as retailers sought to boost sales because of a worrying 0.3 percent drop in October's sales.
However, the Department of Commerce reported that November's sales rose by 0.3 percent, as opposed to the expected increase of 0.5 percent. This weakness in consumer spending is deeply worrying, especially at a time normally associated with Santa-inspired spending, if not extravagance.
The fact that insipid economic growth continues, despite huge monetary stimulation efforts by the Federal Reserve, is cause for serious concern.
The European Union, the world's largest economy, is headed for possible depression. The Japanese economy remains flat upon years of disappointment. Even China's economy gives cause for worry.
America's economy is growing in nominal terms, but likely at only 1.8 percent for the last quarter of 2012.
As the world's major consumer, the United States remains the hope for avoiding worldwide recession.
On Dec. 12, the Fed announced an enormous increase in the amount and duration of its Quantitative Easing program. The size of the new QE suggests the Fed anticipates severe economic trouble ahead, unseen by most economists.
All eyes are focused on U.S. consumers, whose purchases account for 70 percent of the nation's economy.
Like Corporate America, consumers are faced with great uncertainty. In particular, the “fiscal cliff,” engineered by Congress, is creating fear over tax and health insurance rates. This is causing businesses and consumers to hoard cash, despite the Fed manipulating interest rates to offer negative real returns on bank deposits and short-term securities.
In addition, the “fiscal cliff” and all the solutions proposed by the political parties will suck trillions of dollars from the economy over coming years.
Bureau of Economic Analysis data indicate the real disposable income of American consumers remains 5 percent below the level it reached before the 2008 recession. With less disposable money, tighter borrowing requirements and low house prices, consumers face a future of abject uncertainty. No wonder they are nervous.
Retailers are offering revenue-eroding discounts of historic proportions on some items to get people to buy, particularly in the auto industry. Doubtless, these deals tempt many to buy items they cannot afford.
Furthermore, many consumers are tired of austerity. Some are purchasing automobiles or household appliances to help them “feel good.”
Steep discounts and a wish to feel good are causing an economic disconnect. Falling real disposable incomes, the great uncertainties engendered by looming economic recession and the “fiscal cliff” should combine to reinforce a feeling of caution.
Yet in a number of instances, the sentiments of prudence and caution are overtaken by the temptation of steep discounts accompanied by pleasure-oriented purchases.
These factors are based on psychology, rather than household economics. They may counteract the recessionary threats of the “fiscal cliff” in some measure. But it is unlikely that Santa's spirit will keep 2013 afloat.
John Browne, a former member of Britain's Parliament, is a financial and economics columnist for Trib Total Media. Email him at firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Penn State women’s soccer team tops WVU, advances to College Cup
- Penguins’ Johnston agrees with Dubinsky suspension
- Central Catholic wins 5th WPIAL football title
- Pitt makes key defensive plays to hold off Kent State, 85-76
- Outlook for statewide deer season better than 2014
- IUP can’t hold 10-point lead, loses D-II playoff game to Shepherd
- Steelers notebook: Brown downplays possible matchup against Seahawks’ Sherman
- Top Kurdish lawyer shot dead in Turkey
- Clairton captures 12th WPIAL football championship
- Woman dies after bleeding on sidewalk outside Carrick pizzeria
- Frye: Not a record, but bear season still good