Best Practices From Kurt Salmon
The retailing landscape looks much as it did in the throes of the Great Recession. Unemployment remains persistently high, consumers lack confidence in the economy, and talk of a global economic crisis is everywhere.
But move in closer and the picture is more complex and detailed than it was three years ago. Despite the barrage of bad news and feeble macroeconomic growth, consumers have returned to old habits — spending at unprecedented levels, in fact.
Consumer confidence, once closely linked to spending, hovers near 30-year lows. But as the chart below shows, actual spending has bounced back—hitting an all-time high of $9.5 trillion in September.
Furthermore, a modest 4% gain in income and a 34% drop in the savings rate over the past year slightly outpaced inflationary pressures (e.g., increased housing, health care and fuel prices). Combined with a 2% drop in consumer debt (see next chart), these factors mean employed consumers have more money to spend.
The American consumer appears to be on a precipice, precariously balanced between very modest personal gains and the increasing drag of high long-term unemployment and a staggering deficit. Many are calling this the “new normal,” a position of perpetual uncertainty and ongoing anxiety.
The New Normal: A Consumer Divided
In fact, the new normal is that the American consumer can no longer be summed up as a single shopper. The new normal is the trifurcation of our economy among the long-term unemployed and underemployed, the lower- and middle-class at risk of slipping into poverty, and high-income earners. [Read more…]