On Thursday, the capitalist’s Bible, the Wall Street Journal, in an article titled, Consumer Angst Is Striking All Income Levels, reported that:
Signs of weakness are showing up in spending on everything from basics to luxuries.
(Bolding mine)
The report fleshed out that stark appraisal.
American consumers have had a lot to fret about so far this year, between never-ending tariff headlines, stubborn inflation and most recently, fresh fears about a recession. These concerns seem to be hitting spending by both rich and poor, across necessities and luxuries, all at once.
The WSJ expanded on the ‘everyone is feeling the pain’ reality:
Things don’t look much better on the higher end. American consumers’ spending on the luxury market, which includes high-end department stores and online platforms, fell 9.3% in February from a year earlier, worse than the 5.9% decline in January, according to Citi’s analysis of its credit-card transactions data.
The paper quoted the chief executive of a national retailer:
Department stores are seeing signs of penny-pinching all around, too. On Tuesday, Kohl’s CEO Ashley Buchanan said consumers making less than $50,000 a year are “pretty constrained” on discretionary spending, but added that “it’s also pretty challenging” for those making less than $100,000.
The wealthy’s favorite bulk store also saw trading down from the well-off.
Costco, whose membership-fee-paying customer base skews higher-income, said last week that demand has shifted toward lower-cost proteins such as ground beef and poultry. Its members are still spending but are being “very choiceful” about where they spend, Chief Financial Officer Gary Millerchip said. He said consumers could become even pickier if they see more tariff inflation.
The median salary in the US is $61,894 — 50% of payrolled workers earn that or less. Unsurprisingly, they are generally the workers closest to the economic edge. However, Trump’s aggressive incompetence is now starting to impact the confidence of workers earning up to $100,000. This benchmark income covers 82% of all workers.
Politically, the lowest and highest earners tend to be Democratic. The mid-range earners skew Republican, which means that a lot of MAGAs fall in that above-average but sub-$100,000 range. And those guys are beginning to realize that their boy’s overconfidence in his intelligence and ability — plus incipient dementia — is kicking them in their financial ass.
Of course, it is the less well-off that bear the brunt of Trump and the Republican’s one fixed and absolute fiscal principle: get the rich more money. And there are plenty of Trump voters among whites at the bottom of the economic ladder.
The WSJ reports that Walmart customers are feeling the pinch:
Take low-income consumers: At an interview at the Economic Club of Chicago in late February, Walmart Chief Executive Doug McMillon said “budget-pressured” customers are showing stressed behaviors: They are buying smaller pack sizes at the end of the month because their “money runs out before the month is gone.”
As are fast food consumers:
McDonald’s said in its most recent earnings call that the fast-food industry has had a “sluggish start” to the year, in part because of weak demand from low-income consumers. Across the US fast-food industry, sales to low-income guests were down by a double-digit percentage in the fourth quarter compared with a year earlier, according to McDonald’s.
And the lowest-end retail shoppers
Dollar General on its earnings call on Thursday said its customers report only having enough money for basic essentials; some are having to sacrifice even on necessities. The company doesn’t expect any improvement in the economic environment this year and is watching potential changes to government entitlement programs. Dollar stores rely more heavily on food-stamp benefits, which could be on the table for budget cuts.
Dollar General does have one ace in the hole. As poor shoppers’ spending declines, the newly apprehensive rich are discovering the joys of rock-bottom prices.
Dollar General said Thursday that sales to higher-earning households, who are seeking cheaper options, accelerated in the past few weeks.
No part of the American economy is free from the disastrous effects of Trump’s mood swings. Here are a few bullet points from the article:
- Now, everyone seems to be feeling more cautious, and this spending restraint is affecting several categories. There are signs that consumers are pulling back on air travel, for example. Delta Air Lines, American Airlines and JetBlue all cut their first-quarter guidance earlier this week.
- Citi’s analysis of its US credit-card data shows that spending has fallen across most retail categories. In the retail quarter to date, spending plunged 12% and 22% on apparel and athletic footwear, respectively, compared with a year earlier.
- But even less-discretionary categories such as food retail, aftermarket auto parts and pet retail are seeing moderate declines.
- Retailers including Target, Foot Locker and Lowe’s have all reported seeing weak demand in February.
- Checking and savings deposit balances across all income levels have declined over the 12-month period through February and are getting closer to inflation-adjusted 2019 levels.
- Wage growth for all income groups has slowed over the past year.
- Americans’ inflation-adjusted debt balances are starting to surpass prepandemic levels.
Let’s remember that for all his “I will fix it on day one” bluster, Trump is only now starting to roll out his tariff insanity. And God only knows — Trump certainly doesn’t — what existing tariffs will increase, stay the same, or be canceled. And what new tariffs, on which countries, will be rolled out. And adding to the potential calamity, the inflationary effects of the promised mass expulsion have yet to be realized.
Hurricanes start with gusts and high surf. The gale-force winds and punitive storm surge of Trump’s economic inadequacy have yet to hit. It’s going to get uglier.
