Finance & Loan

Profit Confidential Warns Weak Consumer Spending Could Cause Another Recession Within Year

Profit Confidential’s Michael Lombardi details why a trend of poor consumer spending within the next 12 months could lead to another recession.

— Profit Confidential (www.ProfitConfidential.com), an e-letter published by Lombardi Publishing Corporation, a 28-year-old consumer publisher that has served over one million customers in 141 countries, is cautioning that a weak consumer spending trend could send the U.S. into another recession within the next 12 months.

“The economy is said to be in a technical recession when it experiences two consecutive quarters of negative GDP growth,” says economist and lead contributor Michael Lombardi. “By far, consumer spending is the biggest factor in calculating GDP; in fact, in 2013, it accounted for nearly 70% of GDP, meaning that for every $1.00 increase in GDP, $0.70 was associated with consumer spending. While many think it unimaginable, the fact remains that all it would take for this country to fall into another recession is a slight decline in consumer spending.”

And as it stands, U.S. consumer spending is on the decline. Since November 2013, consumer spending for durable goods (goods that can last for a long time, like a T.V. or furniture) declined by 3.23%. Consumers are tapped out and U.S. retailers are facing the same fate; of 175 retailers tracked by FactSet, more than half reported fourth-quarter revenue that was below market expectations. (Source: “Industry Insights – Retail,” FactSet web site, April 11, 2014; www.factset.com/websitefiles/PDFs/industry_consumer/industry_consumer_4.11.14.)

Lombardi explains that so far, for the first quarter of 2014, 20 major U.S. retailers have provided negative same-store sales guidance; only nine have issued positive guidance. For all of 2014, 31 retailers have already issued negative sales guidance and only 15 have issued positive guidance.

These forecasts continue a long-term downward trend. In 2011, same-store sales grew by 2.9%; in 2012, they increased by 2.6%; and in 2013, same-store retail sales grew by 1.5%. Retail sales in 2013 increased at just half the pace they grew in 2011. Consumer spending, which is hands down the biggest portion of GDP, is in outright trouble. And the trend of slower sales growth, maybe even negative growth, has made a recession a very real scenario for 2014. (Source: Ibid.)

“If you take out the stock market rally and look at the cooling housing market, there isn’t much left of the economy,” Lombardi adds. “If 2014 is a down year for the stock market, which I’m predicting it will be, the chances of a recession suddenly look very real within the next 12 months or less.”

“By itself, the U.S. experiencing two consecutive quarters of marginally declining GDP is not a big deal. The problem is with the perception,” Lombardi concludes. “If American consumers hear the economy has slipped back into a recession, consumer spending will soften even further, exacerbating an already tenuous economic situation.”

Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation and Profit Confidential, visit www.LombardiPublishing.com.

For more information about us, please visit http://www.profitconfidential.com

Contact Info:
Name: Wendy Potter
Organization: Lombardi Publishing Corporation
Address: 350 5th Avenue, 59th Floor, New York, NY 10118
Phone: 905 856 2022

Source: http://marketersmedia.com/profit-confidential-warns-weak-consumer-spending-could-cause-another-recession-within-year/43722

Release ID: 43722


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