Recession deepens with less spending
NEW YORK – Americans have slammed their wallets shut since the financial meltdown, and the future is looking downright scary for stores across the country and the whole U.S. economy.
Shoppers from the well-heeled to the low-income have cut back as they worry about shriveling retirement funds and job security. The changes could tilt the economy into a deeper, more painful recession.
The downbeat forecasts from retailers such as Best Buy Co. and Macy’s Inc. on Wednesday came two days after Circuit City Stores Inc. filed for bankruptcy protection. It’s also laying off thousands of workers and closing 20 percent of its stores.
Analysts believe consumers – who usually account for about 70 percent of economic activity – will no longer be the key driver of the economy.
“This is the end of the consumer-based economy,” said Peter Schiff, who runs the investment firm Euro Pacific Capital Inc. in Darien, Conn. “Americans have been buying too much stuff, and now the epic shopping spree is over.”
Even receding gas prices in recent weeks haven’t provided a boost to shoppers dealing with multiple economic worries. For the third quarter, consumer spending fell 3.1 percent, the worst performance in 28 years. Sales at established stores for October were the worst since at least 1969.
Some stores make as much as 40 percent of their yearly profits during the holiday season, and the outlook for this year’s is growing even darker. For toy merchants, that figure is up to 50 percent.
This year, many holiday shoppers will be waiting until the last minute, not because they’re procrastinators or looking to outsmart the stores, but because they simply don’t have the money to spend.
“We always bought something,” said Cindy Schneirson of Phoenix, who hasn’t bought new clothes in more than a year. “I used to get my hair done, nails done. I don’t do any of that now.”