retail news in context, analysis with attitude

MarketWatch reports that "the preliminary University of Michigan-Thomson Reuters consumer sentiment index fell to 74.5 from 82.7 in November.

"That’s far below the 82.0 expected in a MarketWatch-compiled economist poll, eliminating four months of gains and also representing the biggest one-month drop since March 2011.

The movement in the report came overwhelmingly on the expectations side, where the subindex tumbled to 64.6 from 77.6 in November.
Consumers’ assessment of current economic conditions were mostly stable, edging back to 89.9 from 90.7.

And, the Wall Street Journal this morning reports that "consumer spending, a rare pillar of economic strength in recent months, is showing signs of weakening. American consumers helped carry the economy through a spring slowdown and appeared to power a summer resurgence in growth. But in recent weeks government data have shown spending was slower over the summer than previously believed, and it has started off the final three months of the year on an even weaker footing."

Among the trends cited by the Journal:

• "Consumer spending, which accounts for more than two-thirds of economic output, is especially important at a time when other sectors have been struggling."

• "Manufacturing, which helped drive the early stages of the recovery, has faltered amid uncertain demand at home and weakness overseas; the factory sector contracted in November after two months of growth, the Institute for Supply Management reported a week ago."

• "Business investment fell sharply in the third quarter and has likely stayed weak as concerns mounted over the fiscal standoff in Washington. The housing market has shown strong growth this year, but construction activity remains depressed compared with before the recession."

• "Friday's employment report showed the economy added jobs at a steady though hardly spectacular pace in November, but the Labor Department also revised downward its estimate for the number of jobs added in September and October by a combined 49,000 jobs."

All of these trends are occurring within the context of a budget debate between Democrats and Republicans that could well determine - depending on whether they are unable to come to a negotiated agreement on fiscal policy that keeps the country from going off the so-called "fiscal cliff" - whether the country enters another recession.

"The resolution of the budget debate may well determine the outcome," the Journal writes. "Slow but steady job growth and the recent rebound in the housing market have left many households on firmer financial footing, and consumers could again drive the recovery if leaders in Washington succeed in averting the cliff's worst impacts. If they don't, experts including Federal Reserve Chairman Ben Bernanke and the Congressional Budget Office predict another recession."

Kroger CEO Dave Dillon told investors last week that he has seen evidence "of people having a little bit more money in their pocket, or at least the willingness to buy a little bit more." However, Dillon reaffirmed the notion that the economic recovery is "fragile," and that there has not been much improvement among lower-income shoppers."
KC's View:
It is all a house of cards. One good - or bad - wind, and the whole thing can blow away.

We all just have to hope that sanity and probity win out in Washington.