Michelle ThompsonCertain Americans are adopting spending habits reminiscent of a recession, despite increasing optimism on Wall Street and among economists regarding the US economy’s ability to steer clear of a major downturn.
Discount retailers have been sounding the alarm throughout the year, indicating that consumers are scaling back their spending due to economic uncertainties.
This trend has become evident in the financial performance of the leading retailers in the United States. Corporations like Macy’s and Costco, which cater to middle- and high-income customers, cautioned during the summer that consumers are downsizing their purchases for certain items and reallocating their budgets to prioritize spending on travel rather than physical goods.
A customer at Macy’s iconic store on Black Friday in New York, USA, on Friday, November 24, 2023.
Several months later, the surge in “revenge travel” is beginning to taper off, and consumers are still making cutbacks in other areas of their spending. This shift is becoming evident in economic indicators, with US retail sales declining in October, marking the first drop in seven months.
Even discount retailers are not immune to the impact of these frugal shopping trends. Here’s an overview of what three companies have recently stated regarding consumer behavior.
Dollar Tree has experienced an increase in business by attracting new, higher-income customers seeking value deals. Richard Dreiling, the CEO of Dollar Tree, mentioned during a recent call with analysts that a majority of their new customers in the past year have household incomes exceeding $125,000.
However, this hasn’t fully offset the general trend of declining spending, especially among lower-income consumers. Dreiling noted that lower-income consumers have reduced their spending, particularly in higher-margin discretionary categories, in response to the combined effects of inflation and reduced government benefits.
Dollar General anticipates ongoing subdued spending from lower-income customers and had previously adjusted its financial outlook due to declining demand.
According to Dollar General CEO Todd Vasos, their customers continue to express significant pressure on their spending, which is reflected in their purchasing habits. Vasos also mentioned during the company’s third-quarter earnings call that they expect customer spending to remain constrained as they enter 2024.
Walmart, the superstore chain, has seen advantages this year from a shift in spending habits that prioritize essentials and food. However, Walmart has cautioned that consumer spending may weaken after the holiday shopping season, as Americans accumulate credit card debt and deplete their bank accounts.
“I reflect on this year, and it’s been more robust than I initially expected,” stated CEO Doug McMillon in a CNBC interview broadcasted on Wednesday. “However, next year presents a different scenario, and I’m uncertain about what it will entail,” he added.
Elon Musk is calling for Bob Iger’s dismissal following Disney’s decision to withdraw advertisements from X.
The proprietor of X and an unpredictable billionaire who believes in conspiracy theories launched a strong verbal attack on the CEO of Disney on Thursday. He criticized Iger for the decision made by the Magic Kingdom to withdraw advertisements from his struggling social media platform and demanded that Iger be forcibly removed from his position.
Musk, known for using his influential platform to intimidate critics and others, expressed his belief that Iger should be terminated immediately, stating this on what used to be called Twitter. He also suggested that Walt Disney would be unhappy with what Bob had done to his company.
There was no immediate response from Disney’s representatives regarding Musk’s comments. However, Iger is widely acknowledged for transforming Disney into an entertainment giant with successful acquisitions like Star Wars, Marvel Studios, and Pixar during his initial tenure as CEO.
Disney, along with many other major companies, halted advertising on X last month after Musk endorsed an antisemitic conspiracy theory that is popular among White supremacists. Last week, Musk offered a tacit apology for his post after several companies ended their partnerships with X. At the same time, he used strong language to address companies that refused to buy ads on his social media platform.
What has propelled the U.S. economy ahead of other affluent countries?
Not all recoveries from the pandemic are the same.
The wealthiest economies in the world have followed different paths in their efforts to bounce back from the severe impacts of Covid-19.
In a period marked by multiple challenges and crises, including wars, geopolitical tensions, the ongoing effects of the pandemic, high inflation, and significant borrowing costs, there have been only a few positive developments.
The U.S. economy stands out as one of these positive examples, as reported by my colleagues Alicia Wallace and Hanna Ziady. The Gross Domestic Product (GDP) of the United States expanded impressively by 5.2% in the third quarter, surpassing China, which has long been the driving force behind global economic growth.
“In the past year, the United States has significantly outperformed other countries,” noted Innes McFee, Chief Global Economist for Oxford Economics, in remarks to CNN.
The United States has outpaced the economic recoveries of the European Union, the United Kingdom, Japan, Canada, and other advanced economies this year.
Recently, the Organisation for Economic Co-operation and Development (OECD), based in Paris, revised its growth forecasts upward for the United States for this year and the next, while simultaneously lowering its outlook for the 20 countries that use the euro currency. This adjustment followed a similar action taken by the International Monetary Fund (IMF) in Washington back in October.
