Where Has All the Money Gone?
August brings with it many second quarter earnings results from retailers and these numbers are eagerly awaited to indicated outlook for the remainder of the year and potentially get insights into the all-important Christmas sales. On August 14, the juggernaut of all retailers, Wal-Mart, released their earnings and provided a very bleak outlook for the second half of the year. Wal-Mart President and CEO went as far as saying that “Consumers are running out of money.”
Wow. That’s quite a statement. Are American consumers in general truly running out of money? Bullshit I say.
The unemployment rate is almost at an all-time low since 2002 and the coincidence of the dot-com bubble burst. The economy has been on a recovery path asides from the subprime lending crisis…although that is quite significant. Essentially, asides from all the fat cats that are losing some investments playing with mortgage backed securities and investing in homebuilders, the average American is doing okay. A more relevant indicato of here this money is going could be the savings…something Americans are not that good with.
Essentially the US has one of the lowest personal savings rates in the world. We are rarely in the double digit percentage for savings and sometimes in the negative. We spend more than we have. Take a look at the charts and table below for a comparison of how the US fares versus other nations.
Year United States Canada France Germany Japan Mexico UK
2000 2.4 4.8 11.8 9.3 8.5 10.7 0.5
2001 1.8 5.3 12.5 9.5 5.2 7.7 2
2002 2.5 3.5 13.7 10.1 4.9 8.8 0.5
2003 2.4 2.8 12.5 10.4 4 0.7
2004 1.9 2.7 12.4 10.6 3.2 -0.7
2005 -0.4 1.2 11.5 10.7 -0.1
2005 led to a negative savings rate. This means that the average American spent more than they made. Which is great for vultures retailers like Wal-Mart. What could be better? All these Americans buying cheap Chinese imports with lead paint and mercury induced fish. So, what’s the problem? Let’s take a look at how the savings rate moved since 2005.
As you can see, the savings rate hit rock bottom in 2005 and then began to steadily recover with a drop in 2Q 2007. Which coincidentally coincides with Wal-Mart’s exception performance for the first half of this year. With the markets in a tumble and the economy in question and the currency being worth less than an Indian Rupee, this could indicate that consumers are not running out of money but getting smarter and saving for once.
So, H. Lee Scott Junior, sorry to rain on your parade, but leave the Americans alone and don’t make stupid assumptions on the intelligence of you shoppers. Perhaps they are just wise and saving for the forthcoming rainy days or they are just fed up with Big Box marts like Wal-Mart parading into their town and bringing cheap Chinese imports that give kids brain damage.
Tags: Help, Common Sense, Credit, Advice, Banks, Opinion
Now would you attribute the declining savings rate to an increase in shopping at Wal-Mart?
The fact that the American public is in negative debt does seem to me like they are running out of money…
just my opinion
Good observation. However, from the trend it seems that we are past the point of negative saveings (2005). Q3 2006 had 0 savings during a time of economic boom and increased spending that could’ve improved sales figures at retailers. The trend now is still undetermined but not negative. Like I said, unemployment is at a low, savings rate has been worse but could be better. Only time will tell what the true cause is. Maybe just consumer lashback at Walmart or reaction from tainted Chinese goods.