In their on-again, off-again love affair with spending, the American consumer may just have hit the "off" switch again. Both Walmart and America's National Restaurant Association are warning aboutremarkable dropoffs in the trend for consumer spending over the last few weeks, with few prospects for improvement anytime soon.
And on Thursday morning, Walmart reaffirmed its alarm in a financial report that predicts flat same-store sales in the U.S. for the first quarter.
The latest revelation was that U.S. restaurant same-store sales rose much less in January than in December due to a pullback by consumers, according to a restaurant operator survey authorized by the NRA. The trend was worse for full-service restaurants than for quick-serve businesses, but the overall 1.1 percent rise for the month (versus a year earlier) compared with a 2.4 percent increase for December prompted alarm bells to go off.
"Operators are unsure of what the cause of the slowdown was," said Larry Miller, restaurant securities analyst at RBC Capital Markets and creator of the NRA's monthly survey, according to NRN.com. "They cited a laundry list of reasons, including weather, holiday shifts, gas prices and tax-refund delays."
One characteristic of the restaurateurs' survey was a pronounced drop in premium entree orders which, Miller said, they attributed in large part to consumer frugality after U.S. payroll taxes rose by two percent in January. Part of the patchwork fiscal deal made by Congress and President Obama in late December was to allow Social Security taxes to rise again after Obama had slashed them for two years.
On a $40,000 income, according to Bloomberg, that amounts to the abrupt loss in purchasing power of about $15 a week, and according to Walmart, the payroll-tax increase alone might have been enough to tip its customers into a foul mood for purchasing even into February. On Thursday, upon further analysis, Walmart said that a bigger factor in its assessment may actually have been income-tax refund checks to Americans that were delayed because of the fiscal-cliff drama.
In any event, the bellwether chain had expected a strong start to February because of the Super Bowl and generally mild weather around the country, Bloomberg said, but a February e-mail to other Walmart executives from Jerry Murray, the company's vice president of finance and logistics, obtained by Bloomberg, said that sales figures at that point were "a total disaster."
There are differences about how much Walmart's results really matter to the economy as a whole. Clearly there remains a high correlation between sales trends demonstrated by the chain's lower- and middle-class constituency and what the U.S. economy is experiencing and can expect as a whole, but some analysts and economists insist that Walmart's sway has declined as competition has increased.
Besides, some argue, Walmart actually does better during economic tough times than during a recovery. What's more, January sales at Target, with a somewhat more upscale clientele than Walmart's, increased by 3.1 percent, part of a general uptick in merchandise and department-store shopping.
Time, as they say, will tell, but to a U.S. consumer who has outlasted the Great Recession, stubborn under- and unemployment, a sluggish recovery and the stagnation of the 2012 political season—now coping with rising gasoline prices again and lower take-home pay—Walmart's alarm may seem appropriate indeed