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Holiday Spending "Hopes" Crumble As Income Gains Stagnate

Tyler Durden's picture




 

But this year was supposed to be different... Early-year prospects for a revival in consumer spending quickly faded in the wake of the lagged impact of the $148 billion tax hike that began the year. As Bloomberg's Joe Brusuelas notes in the following brief interview, combined with a slower pace of hiring and sluggish wage growth, the result will probably be another in a string of disappointing holiday shopping seasons. It is increasingly doubtful that consumers have the wherewithal to meet the ambitious National Retail Federation forecast for a 3.9% increase in holiday spending to $602.1 billion. Brusuelas believes a 2 to 2.5% increases appears closer to the mark given the economic and policy challenges in place this year.

Via Bloomberg Briefs,

First, starting Nov. 1 one-sixth, or about 48 million, of individuals receiving food stamps will see a net loss of almost $16 billion in transfer payments due to cuts in the Supplemental Nutrition Assistance Program (SNAP).

 

Those in the lower two quintile of income earners, which receive the bulk of U.S. SNAP payments, will probably transfer outlays on discretionary items like electronics and apparel to inelastic non-discretionary categories such food and utilities. Accordingly, large retail operations such as Krogers, Target and Wal-Mart have reduced their holiday shopping estimates. These reductions, in part, are being attributed to the reduction in SNAP payments, the impact of the government shutdown and overall tepid job and income growth, according to the retailers.

Second, recent fundamental data on manufacturing activity, durable goods orders and hiring slowed noticeably, even before the government shutdown, during the first three weeks of this quarter. With hiring during the past three months barely sufficient to meet demographic needs, and inflation-adjusted personal disposable income up a scant 0.9 percent on a year-ago basis, it is unsurprising that both topline retail sales and sales excluding autos, building materials and gasoline, which feeds into the calculation of GDP, have slowed since June of this year, reflecting a deceleration in overall economic activity.

 

Third, the inventory buildup among retailers is also somewhat troubling given the macroeconomic slowdown and probable fiscal restraint due to policy shifts and standoffs that have characterized the second half of the year. Retailers have increased their inventories by about 6 percent compared to year-ago levels, in contrast with a 5 percent decline in 2012 versus 2011 levels.

Given the well-recognized problems with the JC Penney inventory overhang from earlier in the year, retailers such as the Gap have already begun aggressive discounting. Many have annoucned plans to open stores on Thanksgiving in order to add another shopping day to the season. While that may help bolster sales, the severe discounting will compress margins and add to bottom line woes in the quarter.

Perhaps more troubling is the likelihood that the large inventory build will spill over into the first quarter next year. There is also likely to be a repeat performance of “fiscal follies” in Washington, creating an even greater drag on overall economic growth.

While firms that employ state-of-the-art inventory optimization, such as Wal-Mart, began pulling back on orders in mid-September to mitigate the slowdown in consumer demand, most firms in the supply chain do not have that ability. Carol Lapidus, the National Consumer Products Industry Leader at McGladrey (see the clip above) noted that middle market companies that sell into retail for 2014 are getting smaller. Given where the U.S. is in the business cycle, the opposite should be occurring, which should provide a sober note heading into what will probably be another difficult holiday shopping season.

Finally, an unusual confluence of calendar quirks will result in a net decline of five selling days compared to 2012 in between Thanksgiving and Christmas. In addition, with Hanukkah starting on Nov. 28, a portion of traditional holiday spending will probably be pulled forward into late November and early December, creating a scenario where retailers may be tempted into even greater discounting.

 

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Mon, 11/04/2013 - 09:56 | 4119024 superflex
superflex's picture

Because Obama

Mon, 11/04/2013 - 10:06 | 4119037 duo
duo's picture

SNAP users will cut back on clothing and electronics?

20 million households looking at and extra car payment (or even house payment) to pay for Obamacare will be good for retail sales.

Mon, 11/04/2013 - 10:07 | 4119051 VD
VD's picture

the Fed is clearly doing it's job, and it's PD master JPM will have even more biz distributing even moar EBT cards, while O[care] bronze [ie free] plans will steadily increase and the neo-fuedal USSA 'community organized' experiment is brought to its horrifying conclusion.

Mon, 11/04/2013 - 10:22 | 4119114 Headbanger
Headbanger's picture

YEs we can...    Completely fuck it all up!

Mon, 11/04/2013 - 14:27 | 4119779 SDShack
SDShack's picture

Hope & Change was never anything but Hoax & Chains.

Mon, 11/04/2013 - 11:07 | 4119279 azzhatter
azzhatter's picture

What's an income gain?

Mon, 11/04/2013 - 13:52 | 4119686 cbxer55
cbxer55's picture

Something I have not had in three years. ;-(

Everything, and I mean everything, is going up, up ahd away on prices. Yet my income remains exactly the same for the last three years. How do they expect us to bolster their income, when ours does not go up to meet higher prices on everything?

RIGHT!

This will be the second year running, that I buy nothing for no one for Christmas. And told all in the family not to buy a damn thing for me either, because I am not going to even spend the money on gas to travel anywhere, for the second year running also.

Bought no birthday presents, received none in return as well. 

I'm doing my part to starve the beast.

Mon, 11/04/2013 - 11:07 | 4119284 azzhatter
azzhatter's picture

We Are The One we've been waiting for! Forward! Yes We Can!

 

puts dick back in pants

Mon, 11/04/2013 - 09:58 | 4119026 nickt1y
nickt1y's picture

Only inflation driven upticks from now on.

Mon, 11/04/2013 - 10:01 | 4119030 q99x2
q99x2's picture

At the end of the last expansion my dog could have bought a million dollar home. After 5 years of the Obama expansion my EBT is getting cut and my dog's going to have to soon fend for himself.

Mon, 11/04/2013 - 10:19 | 4119107 Headbanger
Headbanger's picture

Well look on the bright side. At least your not looking for any dog recipes!

Mon, 11/04/2013 - 12:33 | 4119498 Nobody For President
Nobody For President's picture

Yet.

Mon, 11/04/2013 - 13:46 | 4119670 knukles
Mon, 11/04/2013 - 09:58 | 4119031 Bearwagon
Bearwagon's picture

Income gains are just barbarous relics no one of real importance would give a shit about.

Mon, 11/04/2013 - 10:01 | 4119035 LawsofPhysics
LawsofPhysics's picture

Define income.  Are we talking about a wage or capital gains, dividends, or interest payments?

Mon, 11/04/2013 - 10:06 | 4119049 Bearwagon
Bearwagon's picture

Hmm, that's tricky. I'd define income as not deriving from the magical powers of a Princeton professor but from work.

Mon, 11/04/2013 - 10:21 | 4119116 Headbanger
Headbanger's picture

I'll take door number three!

Mon, 11/04/2013 - 10:00 | 4119032 new game
new game's picture

i don't like double chins...

Mon, 11/04/2013 - 09:59 | 4119033 29.5 hours
29.5 hours's picture

 

Hah! Who needs income gains in a world of credit? Full speed ahead.

 

 

Mon, 11/04/2013 - 10:01 | 4119034 SheepDog-One
SheepDog-One's picture

So people aren't going to credit-card spend like mad on a bunch of crap they don't need, just because it's the season to be ordered to do so by the banks? Well GOOD!

Mon, 11/04/2013 - 10:02 | 4119038 Bobbyrib
Bobbyrib's picture

Prediction: The holiday forecasts will be beyond bleak and the corporations will cook up the numbers to have them beat expectations and the market will rally.

Unless credit is cut off to stupid people, I don't think holiday spending will take too much of a dip. A moron with a credit card is quite the consumer.

Mon, 11/04/2013 - 13:56 | 4119700 cbxer55
cbxer55's picture

And IMHO, you have to be a moron to have a credit card. I will not have one period, for any reason. I either have the cash to buy what I want, or I go without it. It's worked for me for a long time. I own three vehicles outright, and two of them are NICE! The other is my all-weather beater vehicle, this way my bike and Lightning stay nice. 

But yeah, unless something major happens, the sheeple will be out crushing each other at the nieghborhood Wally World, as usual. I'll be home with some good booze, a good cigar and some popcorn!  ;-)

Mon, 11/04/2013 - 10:02 | 4119041 SheepDog-One
SheepDog-One's picture

Shaping up to be a BLIGHT Xmas for the banksters! YAY!

Mon, 11/04/2013 - 10:39 | 4119194 RSloane
RSloane's picture

Wishful thinking. They'll be the first to get their cut.

Mon, 11/04/2013 - 10:03 | 4119043 fonzannoon
fonzannoon's picture

Everyone knows by now to borrow 10k from a family member on Jan 1st with a 10% interest rate. Put it in the S&P 500 etf, then cash out now and pay the 10k back with the 1k interest and still have $1,500 left over for holiday spending. 

Mon, 11/04/2013 - 10:04 | 4119044 apberusdisvet
apberusdisvet's picture

Disposable income for the middle class is going down, down, down.  A perfect storm of Obamacare, EPA regs, and hidden taxes will ensure the final destruction of the segment of society long recognized as the "last bastion for democracy".  Welcome to the Fourth Reich; the parallels are NOT coincidental.

Mon, 11/04/2013 - 10:05 | 4119046 SheepDog-One
SheepDog-One's picture

This Xmas, I've asked family what they really need, and getting them 1 thing, that's what we're all doing. 

Mon, 11/04/2013 - 10:18 | 4119094 new game
new game's picture

we all quit the xmas thing long ago. family get together for food and drink. biggest non-event put together by market genius under the guise of a messiah. wow, can not even believe what i just typed is possibly true...

Mon, 11/04/2013 - 10:23 | 4119129 SheepDog-One
SheepDog-One's picture

Yea it is true no doubt! We do VERY little, it's mostly for the kids, they love getting some presents which I can totaly understand I did too. For the grownups it's about a real nice dinner.

Mon, 11/04/2013 - 10:35 | 4119162 overmedicatedun...
overmedicatedundersexed's picture

hanukkah spending will save christmas, after all they got the geld. I am hearing PM's are what's for hanukkah

Mon, 11/04/2013 - 11:33 | 4119342 asteroids
asteroids's picture

I wonder what Dickens would think of Obozocare. Would Tiny Tim be crippled at Christmas because his familiy couldn't afford coverage?

Mon, 11/04/2013 - 13:49 | 4119676 knukles
knukles's picture

He'd be fucking euthanized

Mon, 11/04/2013 - 13:33 | 4119643 TrumpXVI
TrumpXVI's picture

That's what we do.  We actually manage to get two really nice diners out of it; Christmas eve (sister's) and Christmas day (niece's) .

Mon, 11/04/2013 - 10:47 | 4119215 Platinum
Platinum's picture

Same here. One gift each. Instead of buying myself a gift, I'm just buying more metal.

Mon, 11/04/2013 - 10:05 | 4119047 RSloane
RSloane's picture

Wgae suppression/loss of wages is the number one economic variable that impacts every known facet of the economy yet no one in power talks about except at election time.

Apparently it hasn't dawned on our catch of brilliant economists to notice that the less people have to spend on discretionary items, the more stagnant the economy.

Mon, 11/04/2013 - 10:07 | 4119053 Bobbyrib
Bobbyrib's picture

It's almost as if they could give a shit less about the middle class. /sarcasm.

Mon, 11/04/2013 - 10:33 | 4119159 Shizzmoney
Shizzmoney's picture

RE

Apparently it hasn't dawned on our catch of brilliant economists to notice that the less people have to spend on discretionary items, the more stagnant the economy.

Well to be fair to those economists, they aren't paid to notice this.  All they are paid to do is schill for higher/lower taxes, higher/lower government spending, and most importantly, to completely ignore Wall St fraud and its effect on the economy.

The only thing worse that the above is when the cost of food into that declining wage/income gets to 30-40%.  Then we enter into riot and civil unrest territory.

 

Mon, 11/04/2013 - 10:50 | 4119230 RSloane
RSloane's picture

I agree with you. Having said that, we can stop pretending as a nation and people that anything economists say has any merit or relationship to reality at all.

The major differences I see here in food purchases is that people are revitalizing depression dish recipes and dispensing with buying ready made or prepared frozen foods. More and more people are growing gardens and learning how to prepare canned food. For a population that has been told how brilliant it is to "do it the easy way" with regards to preparing food, its a bitter pill for some to swallow. Its an entirely new mindset that flies in the face of Wall Street advertising.

Mon, 11/04/2013 - 13:39 | 4119650 TrumpXVI
TrumpXVI's picture

Yup, that's what I'm doing.  I've sort of gotten into baking as a kind of hobby.  It's much, much less expensive than my old hobbies and I get satisfaction from giving the goodies I bake away to family and friends.

By next summer I'm hoping that the raspberries I planted about a year and a half ago will be mature enough to supply enough berries for canning.  This past season they produced enough berries that for a couple of months I didn't have to buy any berries at all for my breakfast cereal.

Mon, 11/04/2013 - 10:08 | 4119048 yogibear
yogibear's picture

It's what happens when Wall Street reduces labor cost while increasing prices. Fewer and fewer people to buy the crap.

Oustourcing of jobs and pressure on wages finally is hitting the street. 

Henry Ford said it well, 

"Paying good wages is not charity at all-it is the best kind of business."

 

Mon, 11/04/2013 - 10:53 | 4119231 all-priced-in
all-priced-in's picture

What type of business do you own?

How much over "market wages" do you pay?

 

 

Mon, 11/04/2013 - 11:11 | 4119296 Shizzmoney
Shizzmoney's picture

RE

How much over "market wages" do you pay?

You can't say, as if he did own a business, that he has all this say in the currency that he would pay his workers in.

The Fed has completely destroyed price discovery...including in labor.  The USD does NOT reflect this economy.  That's why I always love the anti-minwage crew and how they always have these type of straw man arguments on what people should be paid in order to have a decent living in relation to the work they do.

How about focusing on getting control over the currency we pay people from the cabal of globalist central bankers?

Wed, 11/06/2013 - 10:41 | 4126685 all-priced-in
all-priced-in's picture

Pretty obvious he has never owned a business before - so it is easy for him to think a business can just wave a magic wand and pay people more.

Try borrowing against your home - working 80 hours a week to get a business off the ground - then have some dick head with no concept of what it takes tell you how you should pay people.

How about we let the business owner  and the person looking for a job get together and decide how much the position is worth?

 If you have ever hired anyone you know what the market rate is for a job -  

 

Mon, 11/04/2013 - 11:07 | 4119282 therevolutionwas
therevolutionwas's picture

We had somewhat of a free economy back then without all the hidden costs each employee entails.

Mon, 11/04/2013 - 10:07 | 4119050 SheepDog-One
SheepDog-One's picture

SNAP card 'recipients'.....well, while I think that system is chock full of fraud and misuse, FUCK them for only cutting what porr people might get! Creeping 'austerity' for the lower class while the rich never feel the least bit of discomfort ever.

Mon, 11/04/2013 - 11:05 | 4119272 therevolutionwas
therevolutionwas's picture

Gotta keep that MIC healthy so's they can protect the poor folks.

Mon, 11/04/2013 - 10:09 | 4119055 SheepDog-One
SheepDog-One's picture

Clowngress cowards....they never would have gone after SNAP in the light of day, they snuck thru cuts like the bunch of cowards they are!

Mon, 11/04/2013 - 10:10 | 4119067 GetZeeGold
GetZeeGold's picture

 

 

Almost everything gets passed at night these days....err nights.

Mon, 11/04/2013 - 10:10 | 4119060 Professordoomfinger
Professordoomfinger's picture

Don't worry, gasoline is getting cheaper every day according to Disney, Fox, etc.

Mon, 11/04/2013 - 10:26 | 4119124 firstdivision
firstdivision's picture

Well, it is, but not for the reasons that they say.  sub 3 here in my area.  Also Natty is nose diving during the last week, and power futures are falling quite quickly.  July prices seem to be hitting idiotic lows, provided we don't have an economic crisis next year.

Mon, 11/04/2013 - 10:13 | 4119071 dobermangang
dobermangang's picture

A few Black Friday ads have been leaking out for several weeks now.  That's never happened before this early.  Stores are desperate for your money.  I guess they should call it Black Thursday since so many stores are now opening on Thanksgiving.

http://bfads.net/

http://www.theblackfriday.com/

Mon, 11/04/2013 - 10:18 | 4119097 Evil Franklin
Evil Franklin's picture

What confuses me is that there is going to be any increase in spending let alone that it might increase by 3.9% or even 2.5%.

With the work force at its' lowest level in what, ever.  With the SNAP recipients being forced to live on less.  Unemployment is clearly greater than the official line.  Retailers are preparing for a fewer retail days and margins that are being squeezed as if from a rock:  Where does any increase come from?

Mon, 11/04/2013 - 10:20 | 4119112 new game
new game's picture

moar credit...

Mon, 11/04/2013 - 10:21 | 4119115 firstdivision
firstdivision's picture

Gee, and one wonders how oil goes from 110 to less than 95 on not a whole hell of a lot of news/injections.  Gotta get the fools to spend, spend, spend on people they really don't like.

Mon, 11/04/2013 - 10:23 | 4119120 pods
pods's picture

Socks and underwear are on my list. That is it.  

Might even skip the socks.

These slowing numbers are NOT people holding back. They are part of a paradigm shift by people who have given up the old ways.  (Not counting those in the FSA)

pods

Mon, 11/04/2013 - 14:37 | 4119792 SDShack
SDShack's picture

I bought underwear last year during the after Xmas sales. My socks have some holes, but if the holes aren't big enough for the toes to fit through, I figure they are good for another 6 months. Drives my wife crazy. I could use a new belt. I'll shop Goodwill for that.

Mon, 11/04/2013 - 10:28 | 4119139 Shizzmoney
Shizzmoney's picture

Joe Brusuelas always has good analysis.  One of the very few on Wall St who actually talks about the declining wage situation and how it will affect retail and the "New Normal" in declining expactations and sales in a changing environment.

The main thing I got out of this?  Retailers might just punt on poor people and focus on the top 25% of American earners as they are the only ones buying up inventories.....at bargain and discount stores, none the less. 

We really have become a caste society.

Mon, 11/04/2013 - 10:40 | 4119199 earnyermoney
earnyermoney's picture

Queue the MSM article analyzing the dismal Holiday shopping numbers adversley affected by the sticker shock of BarryCare.

 

LOL

Mon, 11/04/2013 - 10:27 | 4119142 superflex
superflex's picture

Black Friday is for the emotionally insecure crowd.

Feel good day of spending folllowed by months of debt.

What a country.

Mon, 11/04/2013 - 10:37 | 4119184 Boondocker
Boondocker's picture

Everyone on my list is getting ammo.

Mon, 11/04/2013 - 14:38 | 4119804 SDShack
SDShack's picture

Does your list include bankers and politicians?

Mon, 11/04/2013 - 11:03 | 4119273 papaswamp
papaswamp's picture

2014 is going to be the real interesting year... New ACA payments hit in January ..people with costs from 40-240% higher. That is when the real screaming begins.

Mon, 11/04/2013 - 11:31 | 4119337 tsuki
tsuki's picture

Breaking:  The War on Christmas is over.  Christmas lost. 

Mon, 11/04/2013 - 13:04 | 4119591 GeezerGeek
GeezerGeek's picture

Christmas lost a long time ago, when massive numbers of self-described Christians got all caught up in consumerism. The war on Christians, however, continues all around the world, including in the good old USSA. After all, government wants its subjects to look to Big Brother for everything; can't have those religious fanatics thinking there might be some transcendant power that is more worthy of adoration that Big Government!

Taking a different path, wouldn't it be interesting if Christians in the USSA chose to practice charity for a season and help others who are in need, rather than indulging in the crass commercialism we've come to expect this time of year? 

Meanwhile, back in the 'real world', .....

Mon, 11/04/2013 - 11:33 | 4119349 moneybots
moneybots's picture

The inflation adjusted 1968 minimum wage is now 10.75.  40% earn no more than 10 an hour.  effectively, 40% of Americans earn less than the inflation adusted minimum wage.

Real wages have been declining.  People don't have the real money to go out and shop with.  The stores need to advertize to the top 1%, as that is where the money is.

Mon, 11/04/2013 - 11:42 | 4119357 moneybots
moneybots's picture

"Finally, an unusual confluence of calendar quirks will result in a net decline of five selling days compared to 2012 in between Thanksgiving and Christmas."

 

What real difference does that make to people who have little money to spend?

 

How long can it take the top 1% to buy gifts?  They are only 1% of the buying public.  they don't need those extra 5 days.

Mon, 11/04/2013 - 11:48 | 4119372 moneybots
moneybots's picture

"Given where the U.S. is in the business cycle, the opposite should be occurring, which should provide a sober note heading into what will probably be another difficult holiday shopping season."

 

The FED is suppressing the business cycle, with its monetary manipulation.

Mon, 11/04/2013 - 12:06 | 4119429 roadhazard
roadhazard's picture

Holidays are built on consumer credit. No soup for you.

Mon, 11/04/2013 - 12:17 | 4119456 wisehiney
wisehiney's picture

My dentist will be spending like a wild mofo.

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