Consumers Are Holding Back

I was reading the Business Week today and it said that Americans are postponing their purchases of pricey items (cars, homes, clothes, and electronics) due to economic uncertainty.

For many years, Americans craved and loved big-screen TVs, McMansions, SUVs, and new wardrobes. However, today a large numbers of Americans seem to have entered a state of consumer paralysis. They simply are not buying.

The temperature readings that came out on consumers this week were almost uniformly bleak. Auto sales fell in the first two months of the year (BusinessWeek.com, 3/18/08), and J.D. Power & Associates predicts total U.S. sales in 2008 will total 14.95 million vehicles, which would be the lowest annual total since 1995. Retailers are struggling, from discounters such as Target to midmarket department store chains like J.C. Penney to Nordstrom at the higher end. And even the top-performing electronics chain, Best Buy, has cut its fiscal 2008 profit forecast, blaming weak sales of TVs, digital music players, cameras, and video games.

Also, consumer expectations about the future are at their lowest point since the recession in the early 1970s.

What's keeping some Americans up at night is uncertainty. Uncertainty about the fate of their employer, about steadily rising gas and food prices, and about their ability to handle huge credit-card bills or resetting mortgage rates. "Consumers are concerned about future job prospects, and the high level of gas and food prices has devastated the financial situation of lower-income households," says Richard Curtin, a University of Michigan research associate professor and director of the Reuters/University of Michigan monthly consumer survey, which will come out later this week.

The only thing that people load up on these days are basic necessities (BusinessWeek.com, 1/17/08). They flock to stores where they can save money by buying items in bulk—places like Costco, which reported earlier this month a 31% profit increase in its latest quarter, and BJ's, the warehouse-club chain that reported that its profit quadrupled in the first quarter. Sales of food and other grocery items increased at Wal-Mart Stores, giving its February retail sales a 2.6% boost.

The broad environment of US society is in the phase of uncertainty and if this continues, big companies like General Motors and General Electric are going to have a difficult time fighting off recession.

Big companies and manufacturers should come out of an idea to surive through this economic uncertainty and recession in consumer purchase.

BY: 20600674 - Entry #3