November’s smaller-than-expected decline in U.S. retail sales showed that consumers, while abandoning spending on autos and other big ticket items, actually pulled out their wallets for smaller items such as clothing amid massive discounting by retailers.
Another hopeful sign at the end of another volatile week was the University of Michigan Consumer Sentiment Survey for early December, which showed a surprise increase from November’s 28-year low.
But the glass-half-full crowd may want to wait before popping the champagne corks, given data on consumers and related industries compiled by CreditSights.
The data highlight the challenges facing retailers as earnings potential is weighed down by extremely weak consumer demand and a need for aggressive (and margin-eroding) discounting and promotional activity to drive sales in the 2008 holiday season.
Indeed, economists quoted in the Wall Street Journal’s Real Time Economics blog were suspicious about the 0.3 percent increase in November sales excluding auto and gas station receipts (overall retail sales fell 1.8 percent in the month). Some thought the increase was due to a calendar quirk from the late Thanksgiving holiday this year.
Other charts from CreditSights were equally concerning, including the chart below illustrating why major tech firms will likely continue slashing capacity and laying off workers in the months to come.
Not surprisingly, media and lodging companies are seeing immediate impacts from the drop in consumer demand. And food companies, as well as health care, aren’t escaping this monster of a downturn either, CreditSights said.
To illustrate the point, note that the percentage of bad debt carried by health care providers as a percentage of revenues has been in the double-digits since the credit crisis began in mid-2007.
For details, see “Every Picture Tells a Story Part 3: Consumer and TMT.”