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U.S. Economy: Retail Sales Drop by Most on Record
Shobhana Chandra and Bob Willis, Bloomberg
Retail sales and prices of goods imported to the U.S. dropped by the most on record, signaling the economy may be in its worst slump in decades.
Purchases fell 2.8 percent in October, the fourth straight decline, the Commerce Department said today in Washington. Labor Department figures showed import prices dropped 4.7 percent, pointing to a rising danger of deflation, and a private report said consumer confidence this month remained near the lowest level since 1980.
“The weakness in growth is intensifying and inflation pressures have evaporated,” said James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who accurately projected the decline in sales. “Deflation is a word that will be increasingly used over the coming months.”
Spending may continue to falter as mounting job losses, plunging stocks and falling home values leave household finances in tatters.
(14 November 2008)
Krugman: Depression Economics Returns
Paul Krugman, New York Times
The economic news, in case you haven’t noticed, keeps getting worse. Bad as it is, however, I don’t expect another Great Depression. In fact, we probably won’t see the unemployment rate match its post-Depression peak of 10.7 percent, reached in 1982 (although I wish I was sure about that).
We are already, however, well into the realm of what I call depression economics. By that I mean a state of affairs like that of the 1930s in which the usual tools of economic policy — above all, the Federal Reserve’s ability to pump up the economy by cutting interest rates — have lost all traction. When depression economics prevails, the usual rules of economic policy no longer apply: virtue becomes vice, caution is risky and prudence is folly.
To see what I’m talking about, consider the implications of the latest piece of terrible economic news: Thursday’s report on new claims for unemployment insurance, which have now passed the half-million mark.
(14 November 2008)
Is The Mall Dead?
Tony Dokoupil, Newsweek
With lighter wallets and heavier burdens, Americans are rethinking their conspicuous consumption. That’s bad news for retailers.
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… the American mall—that most quintessential of American institutions—is in its dying throes, if not already dead. Moribund malls have not gone unnoticed amongst industry analysts and Web sites like Deadmalls.com that feature photos of hundreds of now-abandoned sites. But what were once just worrying signs appear to have finally flat-lined. Last year was the first in half a century that a new indoor mall didn’t open somewhere in the country—a precipitous decline since the mid-1990s when they rose at a rate of 140 a year, according to Georgia Tech professor Ellen Dunham-Jones, coauthor of the forthcoming book “Retrofitting Suburbia,” which focuses on the decline of malls and other commercial strips. Today, nearly a fifth of the country’s largest 2,000 regional malls are failing, she says, and according to the International Council of Shopping Centers, and a record 150,000 retail outlets, including such mall mainstays as the Gap and Foot Locker, will close this year. Xanadu, whose officials declined NEWSWEEK’s requests for comment, has named just nine tenants for its 200 spaces.
So what’s the cause of this malaise? After all, malls have been part of the national landscape for more than 50 years, spawning their own indigenous culture (mall rats), native cuisine (Cinnabon) and home-bred pop sensations from Tiffany to Timberlake. Prior diagnoses have pinned the mall’s decline on retail cannibalization, the repopulation of cities and suburban gang problems. The current economic skid certainly isn’t helping to fill shops and attract vendors.
… Just as people are flying from malls, many are landing at a series of offbeat, alternative trading posts. The Salvation Army has seen sales jump 15 percent at some locations, while The Freecycle Network, a clearing house for second-hand goods has grown from 40 people to around 6 million since its founding in 2003. Each day, the group says, it keeps 500 tons of stuff out of landfills and in use. Another second-hand movement, known as The Compact, where members commit to buying nothing new for an entire year (underwear excluded), has grown from 10 friends to 10,000 members since 2004. Even those who are still buying new are viewing shopping through a changed lens: almost 40 percent of people between the ages of 18 and 30 prefer to use brands that are “socially conscious”—environmentally safe and produced through fair labor—according to research by Alloy Media and Marketing, a youth-focused ad agency.
“It’s about manners,” explains Donna Daniels, a former Duke University anthropologist now at Iconoculture, the retail consultancy. For years, she and her colleagues have been tracking the rise of what they call the “socially frugal” consumer class—people who buy less to escape attention and respect the constraints of others rather than because they have a cash-flow problem. Other experts, including pollster John Zogby, point to a “great transition” in the needs and expectations of average Americans, particularly those under the age of 30.
(12 November 2008)
Buying Binge Slams to Halt
David Leonhardt, New York Times
Just as one crisis of confidence may be ending, another may be coming.
The panic on Wall Street has eased in the last few weeks, and banks have become somewhat more willing to make loans. But in those same few weeks, American households appear to have fallen into their own defensive crouch.
Suddenly, our consumer society is doing a lot less consuming. The numbers are pretty incredible. Sales of new vehicles have dropped 32 percent in the third quarter. Consumer spending appears likely to fall next year for the first time since 1980 and perhaps by the largest amount since 1942.
(11 November 2008)
As factories close, Chinese workers suffer
Edward Wong, International Herald Tribune
… For decades, the Pearl River Delta that includes southern Guangdong Province served as a primary engine for China’s astounding economic growth. But an export slowdown that began this year and that has been magnified by the global financial crisis of recent months is contributing to the closure of tens of thousands of small and midsize factories here and in other coastal regions, forcing laborers to scramble for other jobs or return home to the countryside.
The slowdown also inhibits the ability of China to work with other nations in alleviating the worldwide crisis.
The Pearl River Delta, known as the world’s factory, powered an export industry that pushed China’s annual growth rate into the double digits and provided work for migrants from interior provinces with poor farmland. But circumstances have changed quickly. The slowdown in exports contributed to the closing of at least 67,000 factories across China in the first half of the year, according to government statistics. Labor disputes and protests over lost back wages have surged, igniting fear in local officials.
(14 November 2008)
