American Consumers Surrender

15 May 2003

“Consumers are tapped out. They've done a marvelous job of supporting the economy, but they are basically done … We need something else to pull up the slack.”

Thus spake Sung Won Sohn, chief economic officer at US financial services giant Wells Fargo & Company. His appraisal of the April economic data from the US Commerce Department echoes the views of most economists.

According to the data, Joe and Josephine Public are now more concerned about the safety of their jobs than the geopolitical aftermath of Saddam-zapping. This was reflected in April’s retail sales which fell 0.1% from March. However, when auto sales are factored out of the equation, sales sagged by a more worrisome 0.9%.

Another key element in the decline was a fall in sales of gasoline, which slid 5.9% from late March to late April as prices fell by average of ten cents a gallon. Clothing, furniture and garden supplies also fell because of job fears, with unemployment now standing at 6% compared year-on-year with 4%.

Opined Wachovia chief economist John E Silvia: “It's not just that the unemployment rate is a problem, it's that the people who are unemployed are unemployed for a longer period of time. The job pool is stagnant.”

Data sourced from: The Washington Post Online; additional content by WARC staff