Wal-Mart caused quite a stir recently when company sources fretted over the lowest February month-to-date sales figures in 7 years (as reported by Renee Dudley in Bloomberg). The plunge followed a disappointing January. Many market analysts look at the retail giant as a bellwether for the national economy, of which it forms a considerable part.
The retail environment is proving to be stubbornly tough as President Barack Obama begins his second term. The temporary cut in Social Security taxes expired in January, and the restoration of the normal rate means that workers are paying an additional 2% of their pay in FICA levies. In addition, income tax refunds will arrive later this year, as both the IRS and the tax preparation industry reprogram their computers in the wake of the “fiscal cliff” deal enacted on New Year’s Day.
The larger macroeconomic picture is not exactly rosy, either:
Simon (Wal-Mart CEO Bill Simon) cited negative economic growth, declining consumer confidence and rising unemployment as challenges facing the company. The U.S. economy shrank at a 0.1 percent annual rate in the fourth quarter, and the unemployment rate rose 0.1 percentage point to 7.9 percent in January. The Conference Board’s measure of consumer confidence declined last month to the lowest since November 2011.
For those inclined to see the glass as half-full rather than half-empty, there is the notion that Wal-Mart’s problems are more linked to its size, target market of less affluent Americans and management decisions. Brad Plumer of The Washington Post’s “WonkBlog” notes that arch-rival Target’s sales are actually up in January, suggesting that the malaise is confined to the less affluent segments of the consumer market.
Maybe. But less affluent consumers form the fastest growing demographic of the Obama economy, and the observation provides cold comfort to a public now being bombarded with news about the coming sequestration battles.
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