Consumer Spending Continues to Decrease, Recession Likely
January 14, 2008
(Long Island, N.Y.) With more companies predicting slower sales forecasts for the year 2008, Sears Holdings Corp. chimed in the chorus for the business sector’s most notable economic fear of Recession and has warned that the drop in sales might mean job cuts for hundreds if not thousands of workers which are currently employed in the World’s largest retails group.
Consumer spending which has been resistant even through market downfalls and the ever heightening price of crude oil in the World Market the last few years has seen a dramatic downfall in the last quarter of 2007 and since it represents at least 65% of the economic activity of the whole nation, the sharp decrease might be a push towards recession if this trend continues for the second quarter of 2008.
“When all is said and done, we have probably entered into a recession. The weakness in the holiday season was the tipping point,” said Carl Steidtmann, chief economist at Deloitte Research. “Consumers are feeling very pinched,” Steidtmann added. He said signs the “aspirational luxury” customers are retrenching and disconcerting. With jobs practically stalling in December and the country’s unemployment rate at a two year high of 5 percent, the consumers are in for savings rather than spending.
Patricia Edwards who is a well known analyst for Wentworth, Hause and Violich added that in the long run, mall based apparel stores such as Chico’s and GAP Inc. will be forced to close out some store outlets which could further the damage to the unemployment rate. “I don’t care whether the economy is in a recession; the consumer is in a recession. When you are not buying name-brand cough syrup, something is going on.” She said.
Prominent retail stores such as Sak’s and jewelry chain Zales are also experiencing heavy plunges in their stock market shares with an average decline of $5 per share which could mean that even the more affluent customers are steadily holding off on buying in this economic downturn further pointing towards Recession.
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