Wal-Mart has a great perch from which to observe the effect the economy is having on consumers — particularly low and middle-income ones. And it’s not pretty. CEO Eduardo Castro-Wright described yesterday what he called “disturbing behaviour”, such as a new pattern of parents buying baby formula right around pay day. Also, not surprisingly, shoppers are shifting over their spending from discretionaries and name brands, over to generic, consumer staples.
It’s more evidence of the “doozy” thesis. Consumers are the engine of the economy, and now they’re broke, or at least getting there. You can loosen the TED spread all you want (ed note: glibly said something about the TED spread as shorthand for improving credit conditions, but it didn’t make any sense and was a distraction) unthaw the credit market all you want, but it’s going to be hard for the people living paycheck-to-paycheck to build up a cushion. Credit won’t be available to them, the way it once was, so this ratcheting down of spending and lifestyle will now just be a blip.
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