It’s a bad thing for retailers. We’re also being told that it is a bad thing for job creation. More than half of all jobs are created by small businesses and many small businesses have used worldwide recession to teach the lesson of doing more with less.
Yet at its core, the prospect of people cutting spending on things like apparel and inessential big purchases – like automobiles and giant flat screen televisions, should not be seen as a bad thing. Weren’t we told that Americans HAD to increase their savings rate? That rate is now up to 6.4% from the latest report about three times greater than 2 years ago. An article in today’s NY Times highlights the challenges of retailers and the economy in general – http://nyti.ms/9ylhPl
Economists never agree but there does seem to be consensus that consumer spending which represents 70% of the American economy has to move forward in order to enable a real recovery to take place. Since retail sales were so bad a year ago, John Long, a retail strategist at Kurt Salmon Associates noted “that should have made this July’s comp a layup”.
An article in the Wall Street Journal earlier this week http://bit.ly/ayAGVe noted that sales of technology and electronics are bright spots but those sales appear to be coming at the expense of items like clothing and appliances.
I cannot for a moment imagine that returning to the ways of the recent past – profligate spending and people spending money they did not have in the first place – will result in economic salvation.
We run a marketing agency and our primary focus is helping our clients gain and retain customers. Consequently consumer (and business for that matter) spending is critical to our mutual success. However I am not disappointed that Americans are being more careful about how much they are spending while at the same time increasing their savings.
The big problem for businesses like ours is getting banks to loosen up their purse strings and actually lend money for expansion and growth for small businesses. But if a return to spending money one does not really have is the answer we are in a lot more trouble than I ever could have imagined.