Independent Research firms – Outlook on Consumer Spending


The hope for a quick economic rebound is unlikely. Earlier this week the Federal Reserve announced that the United States economy is likely to shrink  more than initially anticipated. Originally estimated to contract by 0.5 to 1.3 percent, the Fed has changed these numbers to 1.3 to 2 percent. Consumer spending, which makes up approximately 70 percent of the economy activity, is a clear indication of these new projections. A number of independent research firms share this sentiment.

Strategas Research, an investment strategy, macro-economic and policy research firm, warns that “the economic performance could look more like a square-root sign: down, up and then sideways.”

Chief economist Richard Yamarone at Argus Research, an independent research firm that produces and distributes investment and economic research adds, “When you have record job losses, you have to expect record declines in spending and economic activity in general.”

The confirmation of these theses can be seen in recent retail data. Earlier this week, Zack’s Investment Research’s Bear of the Day, (a stock likely to under-perform the S&P over the next 6 months) was retail chain JC Penney’s.  For the fiscal first quarter ending on May 2nd, JC Penney’s net profit was $25 million or 11 cents per share. This compares to a profit of $120 million or 54 cents per share, last year. JC Penney’s is among the many store retailers facing declines because of cutbacks in consumer spending.

Additionally, American Express announced this week that they will eliminate 4,000 jobs in order to cut another $800 million in costs thus showing that even for a company that prides themselves in catering to a more affluent client, no one is immune to the cutbacks in consumer spending.

Britt Beemer, CEO of America’s Research Group, a consumer behavior research company focused on the retail sector, believes that the United States is in a deep retail freeze that is likely to continue for some time.  “The consumer still feels that they are in the bottom of this pit and they are by no means getting out of it,” said Britt Beemer.

While there is no clear answer on when we will begin to see a significant uptick, the general consensus among research firms is evident- consumer spending data provides further evidence that that we still have a ways to go.


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