Another Recession "Canary in the Mine": Wal-Mart Sales Flat in Spite of Lower Oil Prices - Nouriel Roubini

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Reading Nouriel Roubini is just the thing to send you off to work whistling like one of Snow White's dwarfs, isn't he? DS

Abstract: A 0.5% year-on-year sales growth means a negative real growth rate of sales of about 3% given the level of US inflation. So, Wal-Mart sales are collapsing in real terms and in nominal terms they are growing as slowly as they did at the beginning of the 2001 recession, an ominous sign as Wal-Mart sales are a clear leading indicator of economic activity. So, why arent Wal-Mart customers rushing to buy at Wal-Mart now that gasoline prices are way down relative to the summer? The non-sense argument - that lower oil that is only back to the very high levels it had before the summer spike will rescue the US consumer - is now faltering. With housing being in a total meltdown (the other nonsense of a housing market "bottoming out" has absolutely no base either) and the effects of the Fed tightening in the pipeline, you have a consumer buffeted by mediocre real wage growth (most of the alleged increase in incomes is that of the very rich who get the bonuses and stock option, not the median worker who is squeezed), slumping employment growth (51K jobs in September), negative savings, high debt ratios, falling housing wealth, rising debt servicing ratios. So, the argument that still high (but lower than summer peak) gasoline prices will rescue the US consumer is proving to be a myth.(...) So, where is the basis of the Q4 rebound in growth that is becoming the new mantra of all soft-landing optimists? The simple answer is that this alleged Q4 rebound has, so far, little economic data to back it up. It is increasingly clear that Q4 growth looks very likely be worse than Q3 based on the flow of incoming macro data: softening consumption, even worse housing contraction, slowing non-residential investment, signals of a slowdown in corporate investment, falling auto production, inventories adjustment after two quarters of excessive increase in unsold inventories, faltering consumer durables demand. It all adds up to a growth rate in Q4 that is closer to zero than to 1%. READ MORE