“Wal-Mart dropped 1.6 percent after the retailer told suppliers its [sic] is cutting orders this quarter and next to address rising inventories.”
The article spends a lot of effort trying to tie the WalMart move to “uncertainty” over the budget/gov’t shutdown/debt ceiling drama that is likely to unfold in the next few weeks. That is a mistake; either intentional spin to “protect” its own economic forecasting or just badly misreading the economy as it has performed. Even the Fed has been surprised by the economy, and it had very little to do with fiscal maneuvering.
Earlier today, Bloomberg highlighted its national poll results that stood in stark contrast to the prevailing opinion of the professional economist subset.
“Fewer people anticipate improvement in the economy’s strength over the next year than in the last survey in June, with 27 percent saying the expansion will be more robust, down from 39 percent who expected improvement three months earlier.”
The comments in the article are very telling, though anecdotal, about this dichotomy between what “Main Street” feels and what economists are seeing and, more importantly, predicting. Even the wording of the link to the article suggests something deeper, as the actual title reads only, “Americans In Poll Doubt Economy Rebound”, where the actual link adds the phrase “in defiance of forecasts.” The reactions of economists and central bankers to this “defiance” is worrisome.
“While economists in the Bloomberg forecasting survey say the expansion will reach a 3 percent rate by the third quarter of next year, that would come as a surprise to Wendel Smith, 39, of Alpine, Utah. A serial entrepreneur, Smith says he’s focusing on online businesses that are less U.S.-centric.”
It’s the same old story again, namely that the recovery is just around the corner because some central bank did something. The difference between 2013 and 2012, as the retail segment reminds us, is that fewer are actually “buying” the narrative anymore because they consistently fail to live up to the promise. The economist who cried recovery has done so one too many times.
To put this into perspective, the durable goods report released today does not look anything like a trend that should inspire such optimism. So in that respect, “Main Street” seems to be more accurate in its assessment (which is not really surprising since the economy operates in ways models just cannot predict nor even accurately measure). Despite “stimulus” thrown at it every which way, the economy is either impervious to policy (it doesn’t work) or reacts negatively to it (makes it worse).
In the chronology of activity (shipments), there is too much similarity to 2007-08 to put much faith in the recovery narrative, and that is, in my opinion, feeding this growing sense of unease in both consumers and businesses.
As much as retailers are reacting to what they perceive of the consumer climate, there is still a lot of reluctance and inability on the part of businesses to invest in productive capacity. The falloff in computers and electronic equipment last summer was a warning that businesses were perhaps retrenching; that there has yet to be a rebound more than suggests it is ongoing.
This year, perhaps even more than previous years, was supposed to be “the year”. While former Treasury Secretary Geithner was far too premature in his “recovery summer” farce, the professional class of economists was near certain this would finally be the year.
Better luck next year?
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