Retail recovery is indeed in effect, but what is the actual cause.0
Typically retail rises in the summertime with folks on vacations making guilt free purchases and summer markdowns flying off store racks. But the past few summers have been a different tune. Summer 2008 was the darkest in retail history with overflowing inventory and deep discounts creating losses across the sector. Summer 2009 proved slightly better but failed to turn into the true recovery many economists predicted. Earlier this year, economists predicted the ebb and flow of consumers to be the biggest challenge for retail in summer 2010, and the summer’s consistent rollercoaster has fulfilled that prophecy.
Because retail spending is directly affected by the mood of the country, it’s safe to say that the country is unsure which face to make. A little extra relief means that happier citizens feel comfortable spending a little bit more. Then Wednesday Federal Reserve Chairman Ben Bernake said the job market would remain a challenge for the unemployed predicting the current 9.5% wouldn’t drop to 7.5% until late 2012. Immediately, the S&P and Dow Jones lost over a point.
Another major factor creating the rollercoaster retail is the distribution of wealth. The wealthiest ten percent of the population are responsible for 50% of retail sales and 70% of retail margins. So outside of luxury, the percents are creeping painfully slowly with frequent setbacks. So what looks like retail sucesses, might only mean successes for the upper class shopping industry. Before you get green with envy or red with anger, remember that for the state of our economy, stimulus is stimulus. History indicates that wealthy shoppers will stimulate the economy first and the rest of the mood will follow. Unfortunately, that track takes a lot of downs before it turns up.
Know something we don't? Email us
at [email protected]