Consumer Spending Falls Sharply In July As Major Retailers Lose Ground

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One of three respondents in a recent survey said they would spend less on consumer goods over the next 90 days than they said they would in June. The drop was 6 percentage points to 32%. Those who said they planned to spend more in the next 90 days declined to 30% to 38%, an especially sharp drop-off in such a short time.

Vacation, consumer electronics, restaurants, and durable goods will all be affected, a sign of how broad-based the pullback is. People who plan to spend money at large retailers particularly Walmart (NYSE: WMT), Target (NYSE: TGT), and Costco (NASDAQ: COST), and Best Buy (NYSE: BBY) plunged with many of the predictive figures moving to multi-month lows.

Shoppers who intend to go to Walmart in the next 90 days fell four points.  The figure was five points for Costco, the largest drop in six months. Plans to shop Best Buy in the next 90 days dropped to a 17-month low. Intentions to shop (NASDAQ: AMZN) also fell sharply. The data are from a Changwave survey completed on July 9 that polled 2,795 consumers.

The survey confirms information from other private organizations like the The Conference Board and the University of Michigan. All the figures point to a sharp slowdown that began in June and is likely to go through the third quarter at least. Many economists believe that second quarter GDP to be released on Friday will be up by no more than 2%, mostly due to June activity. The third quarter could be weaker.

The data also make it likely that third quarter retail earnings will be weak which leaves only the holiday season for companies like Walmart and Target to make their profit forecasts. The year may be as miserable as 2008 was if sales in October and early November are not robust.

Douglas A. McIntyre