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Some Americans are spending like they’re living in a recession, even as optimism grows on Wall Street and among economists that the US economy will avoid a substantial downturn.
Discount retailers have warned throughout the year that customers are pulling back their spending in the face of economic uncertainty.
That’s shown up in the earnings of the most prominent retailers in the US. Companies including Macy’s and Costco, which are geared towards middle- and high income shoppers, warned during the summer that consumers are trading down for some items and reshuffling their budgets to spend more on travel over goods.
Months later, the “revenge travel” boom is winding down. Consumers are still downsizing other parts of their spending. That’s starting to show up in economic data: US retail sales fell in October for the first time in seven months.
Even discount retailers have felt the bite of frugal shopping trends. Here’s a look at what three companies have said in recent weeks about consumers.
Dollar Tree: The company has seen a boost from luring in new, higher-paying customers looking for bargains. Most of Dollar Tree’s new customers over the past year have household incomes totalling over $125,000, said Richard Dreiling, Dollar Tree chief executive, in a call with analysts last month.
But that hasn’t been enough to counter the broader trend of softening spending, particularly as seen among lower-income consumers.
“As lower-income consumers responded to the accumulated impact of inflation and reduced government benefits, we saw a notable pullback in spending, particularly in higher-margin discretionary categories,” said Dreiling.
Dollar General: The company expects to continue seeing softer spending from lower-income customers. The company earlier this year cut its outlook due to weakening demand.
“Our customer continues to tell us they are feeling significant pressure on their spending, which is supported by what we see in their behavior,” said Dollar General CEO Todd Vasos during the company’s third-quarter earnings call on Thursday. “We anticipate customer spending may continue to be constrained as we head into 2024.”
Walmart: The superstore chain has benefitted this year from a shift in spending that prioritizes food and necessities. But Walmart warned that consumer spending could weaken after the holiday shopping season as Americans’ credit card debt piles up and bank accounts drain.
“I look at this year, and it’s stronger than what I would’ve thought,” said CEO Doug McMillon in a CNBC interview that aired on Wednesday. “Next year is a different story. I don’t know what next year’s going to look like.”
Elon Musk wants Bob Iger fired, reports CNN’s Oliver Darcy.
The X owner and erratic billionaire conspiracy theorist went on a rampage Thursday against the Disney chief executive, assailing Iger for the Magic Kingdom’s decision to pull advertisements from his imperiled social media platform, and declaring that Iger should be forcibly removed from his job.
“He should be fired immediately,” Musk, who often uses his influential perch to bully critics and others, wrote about Iger on the platform formerly known as Twitter. “Walt Disney is turning in his grave over what Bob has done to his company.”
Representatives for Disney did not immediately respond to a request for comment. But Iger is widely credited for boosting Disney into an entertainment juggernaut through a series of well-executed acquisitions — Star Wars, Marvel Studios, and Pixar — during his first stint as chief executive.
Disney, like a slew of other major companies, stopped advertising on X last month, after Musk endorsed an antisemitic conspiracy theory popular among White supremacists. Musk tacitly apologized for the post last week after the flurry of companies ceased their relationships with X, but simultaneously delivered a profanity-laced message to companies who decline to purchase ads from his social media platform.
Read more here.
Not all pandemic recoveries are created equal.
The world’s richest economies have taken diverging paths in recuperating from the devastating effects of Covid-19.
At a time when multiple forces and crises — wars, geopolitical tensions, the pandemic’s lingering aftershocks, high inflation and steep borrowing costs — weigh on global growth, there have been few bright spots.
The US economy is one of them, report my colleagues Alicia Wallace and Hanna Ziady. Gross domestic product in the United States grew at a remarkable 5.2% in the third quarter, ahead of China, long the engine of global growth.
“The US has really outperformed relative to other countries for the past year,” Innes McFee, chief global economist for Oxford Economics, told CNN.
The United States has powered ahead of the European Union, the United Kingdom, Japan, Canada and other advanced economies this year.
Last month, the Paris-based Organisation for Economic Co-operation and Development became the latest intergovernmental body to upgrade its forecasts for US growth this year and next, while downgrading the outlook for the 20 countries that use the euro currency.
That followed similar moves by the Washington-based International Monetary Fund in October.
Read more here.
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