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> Businesses equate recessions with reduced demand for goods and and services, yet demand remains strong This isn't true, major retailers have been reporting

by njcgbc 4y ago

> Businesses equate recessions with reduced demand for goods and and services, yet demand remains strong This isn't true, major retailers have been reporting falling demand. I'd cite the WSJ but for some reason I can't paste the link in this box, just Google "falling demand Wal-Mart" > enough to push prices and profits to record levels. Adjust both for inflation

bushbaba 4y ago
Falling demand of non-necessities. People aren't buying "TVs". Which as you call out, is a stupidly strong recessionary signal.
- InefficientRed 4y ago
  Or, damn near every household bought a new TV during the pandemic lockdowns using their stimulus checks and now no one needs a new TV. I think Walmart's story in particular is one of stupidly bad demand forecasting.
  - njcgbc 4y ago
    Fast food is reporting the same thing, McDonald's put out a report a few days ago, Yum! Brands is yet to report results for the quarter but similar results are expected. Target had a similar report to Walmart. It is mostly discretionary spending that is down; Wal-Mart reported the largest fall in apparel iirc, but demand is demand. One would expect discretionary spending to fall first, and hopefully it stops there. Again I apologize for not providing a direct citation due to my dumb mobile browser but these are days-old news stories and it should be easy to confirm
    - rustybelt 4y ago
      I know I've cut back on fast food because both product and service quality have declined dramatically, likely due to staffing shortages. Long wait times, cold food, and incorrect orders have pushed me to the point of staying away. It's a weird time, and it's hard to untangle all these additional factors. That said, I'm sure higher prices are having an impact as well.
      - InefficientRed 4y ago
        Fast food is pricing itself out of the market. I think it's a great example of a sector that failed to innovate and is now incapable of providing a product worth buying at prices that are profitable. McDonalds et al. probably should've been investing a lot more in automating their kitchens. The fact that a huge percent of locations -- and all drive-thrus -- still use humans for the ordering process is, similarly, inexcusable. Unless the US massively increases its low-skilled immigration quotes, robotics firms will be the FAANG equivalents of the 2020s-2030s.
        whatshisface 4y ago
        If McDonalds can't afford to pay a living wage at the local cost of living, nobody will immigrate to work for them.
        InefficientRed 4y ago
        You can fit 3 generations in a single family home in an American suburb of a mid-sized city, and half the world's population would either (a) consider that a QoL improvement or at least (b) put up with it for a while to remit back home. For all the doom and gloom in the USA, it's still an incredibly rich country. To be clear: I'm not making a moral statement here. This is a statement of fact, not a statement of ethical preference.
        whatshisface 4y ago
        Can three people working at McDonalds own a single family home in an American suburb?
        roflyear 4y ago
        Three families can....
        InefficientRed 4y ago
        Someone working low-paid hourly wage work can probably make $20K. A few siblings + their parents = 5 people = $100K. Stagger availability schedules so there's always someone home with the kids, and share vehicles. Suburb of top-tier cities? No. Cheapest suburb of a midwestern city? Absolutely. Again, not saying it's reasonable. Just that it's possible.
- cma 4y ago
  But people bought more TVs than normal during the pandemic, so it may also be part 'satiation' signal.
- kube-system 4y ago
  Not across the board. Demand for consumer discretionary spending outside of the home is up. People are tired of sitting at home. They don’t want to buy a TV and binge Netflix. They did that for 2 years. They’re going out to eat, going on vacation. Trying to get on a flight.
- babypuncher 4y ago
  But demand for services and "experiences" is way up. I think it's unrealistic to expect retail goods to maintain the same highs they had during the pandemic. For a big chunk of the last two years, people couldn't go to concerts, bars and restaurants operated at limited capacity, vacation destinations had travel restrictions in place, etc. This lead people to take the discretionary income they would normally spend on those things and put it into retail goods that improve their lives stuck at home. TVs, game consoles, what have you. Now that restrictions are essentially nonexistent in the US, people are returning to those pre-COVID activities.
  - pclmulqdq 4y ago
    The evidence does not suggest that demand for services and experiences is up. Demand for durable goods spiked when COVID checks went out, then returned to parity with demand for services and non-durable goods. According to the fed, both of those have dropped over the last two years.
InefficientRed 4y ago
> This isn't true, major retailers have been reporting falling demand. As OP said, >> and services. > Wal-Mart WalMart's issue is that they have a massive inventory/demand mismatch. They already have the headwind of a shift from goods to services, and then on top of that they also massively mismanaged a shift in consumer preference within goods. I have a feeling that they are also feeling the squeeze from Amazon. Many households treat Prime as a fixed cost but the 20 minute drive out to Walmart is a real expense that can be substituted with Amazon purchases. Tonight's earnings will be interesting. Compare to eg Visa [1]. I expect that the "last hoorah" spending of this summer will grind to a halt in the winter and by Q2 2023 we'll be able to see a massive decline in consumer spending during Q4 in particular. But we aren't there yet, at least in aggregate, because consumers are spending like mad on services. [1] https://www.reuters.com/business/finance/visa-quarterly-profit-jumps-unrestrained-consumer-spending-2022-07-26/ https://www.reuters.com/business/finance/visa-quarterly-prof...
p_j_w 4y ago
>I'd cite the WSJ but for some reason I can't paste the link in this box, just Google "falling demand Wal-Mart" I'd rather not base my picture of the entire economy around a single retailer. What's going on with other retailers? Amazon, Best Buy, Target, etc? Have they more than picked up the slack that Wal Mart is seeing?
- InefficientRed 4y ago
  > I'd rather not base my picture of the entire economy around a single retailer Or retailers in general. Retail spending is down because services spending is up -- people are going to the beach and buying plane tickets instead of buying TVs and patio furniture. Regardless of whether we're in a recession, retailer numbers aren't a good indicator for the duration/depth/type. We spent all of 2020 hearing that demand was pulled forward. Well, it was pulled forward from somewhere, and now we are there. > What's going on with other retailers? Best Buy missed by a lot; sales down by over 10%; forecast was a 1% contraction. Amazon tonight. Always complicated because of AWS, digital content, and now a substantial advertising business. If you want the retail details you have to go past the headline numbers. Target in mid-August but expectations are similar. My guess is that none of those companies will be hit has bad as Walmart because (1) Walmart was just particularly badly mismanaged, and (2) these other companies are just different in kind (particularly Amazon -- they could eg suffer retail losses while beating estimates on Advertising/Cloud)
  - p_j_w 4y ago
    >Or retailers in general. Retail spending is down because services spending is up -- people are going to the beach and buying plane tickets instead of buying TVs and patio furniture. >Regardless of whether we're in a recession, retailer numbers aren't a good indicator for the duration/depth/type. We spent all of 2020 hearing that demand was pulled forward. Well, it was pulled forward from somewhere, and now we are there. All fair points. >Best Buy missed by a lot; sales down by over 10%; forecast was a 1% contraction. Ouch.

by njcgbc 4y ago

bushbaba 4y ago

Falling demand of non-necessities. People aren't buying "TVs". Which as you call out, is a stupidly strong recessionary signal.

InefficientRed 4y ago
Or, damn near every household bought a new TV during the pandemic lockdowns using their stimulus checks and now no one needs a new TV. I think Walmart's story in particular is one of stupidly bad demand forecasting.
- njcgbc 4y ago
  Fast food is reporting the same thing, McDonald's put out a report a few days ago, Yum! Brands is yet to report results for the quarter but similar results are expected. Target had a similar report to Walmart. It is mostly discretionary spending that is down; Wal-Mart reported the largest fall in apparel iirc, but demand is demand. One would expect discretionary spending to fall first, and hopefully it stops there. Again I apologize for not providing a direct citation due to my dumb mobile browser but these are days-old news stories and it should be easy to confirm
  - rustybelt 4y ago
    I know I've cut back on fast food because both product and service quality have declined dramatically, likely due to staffing shortages. Long wait times, cold food, and incorrect orders have pushed me to the point of staying away. It's a weird time, and it's hard to untangle all these additional factors. That said, I'm sure higher prices are having an impact as well.
    - InefficientRed 4y ago
      Fast food is pricing itself out of the market. I think it's a great example of a sector that failed to innovate and is now incapable of providing a product worth buying at prices that are profitable. McDonalds et al. probably should've been investing a lot more in automating their kitchens. The fact that a huge percent of locations -- and all drive-thrus -- still use humans for the ordering process is, similarly, inexcusable. Unless the US massively increases its low-skilled immigration quotes, robotics firms will be the FAANG equivalents of the 2020s-2030s.
      - whatshisface 4y ago
        If McDonalds can't afford to pay a living wage at the local cost of living, nobody will immigrate to work for them.
        InefficientRed 4y ago
        You can fit 3 generations in a single family home in an American suburb of a mid-sized city, and half the world's population would either (a) consider that a QoL improvement or at least (b) put up with it for a while to remit back home. For all the doom and gloom in the USA, it's still an incredibly rich country. To be clear: I'm not making a moral statement here. This is a statement of fact, not a statement of ethical preference.
        whatshisface 4y ago
        Can three people working at McDonalds own a single family home in an American suburb?
        roflyear 4y ago
        Three families can....
        InefficientRed 4y ago
        Someone working low-paid hourly wage work can probably make $20K. A few siblings + their parents = 5 people = $100K. Stagger availability schedules so there's always someone home with the kids, and share vehicles. Suburb of top-tier cities? No. Cheapest suburb of a midwestern city? Absolutely. Again, not saying it's reasonable. Just that it's possible.
cma 4y ago
But people bought more TVs than normal during the pandemic, so it may also be part 'satiation' signal.
kube-system 4y ago
Not across the board. Demand for consumer discretionary spending outside of the home is up. People are tired of sitting at home. They don’t want to buy a TV and binge Netflix. They did that for 2 years. They’re going out to eat, going on vacation. Trying to get on a flight.
babypuncher 4y ago
But demand for services and "experiences" is way up. I think it's unrealistic to expect retail goods to maintain the same highs they had during the pandemic. For a big chunk of the last two years, people couldn't go to concerts, bars and restaurants operated at limited capacity, vacation destinations had travel restrictions in place, etc. This lead people to take the discretionary income they would normally spend on those things and put it into retail goods that improve their lives stuck at home. TVs, game consoles, what have you. Now that restrictions are essentially nonexistent in the US, people are returning to those pre-COVID activities.
- pclmulqdq 4y ago
  The evidence does not suggest that demand for services and experiences is up. Demand for durable goods spiked when COVID checks went out, then returned to parity with demand for services and non-durable goods. According to the fed, both of those have dropped over the last two years.

InefficientRed 4y ago

> This isn't true, major retailers have been reporting falling demand. As OP said, >> and services. > Wal-Mart WalMart's issue is that they have a massive inventory/demand mismatch. They already have the headwind of a shift from goods to services, and then on top of that they also massively mismanaged a shift in consumer preference within goods. I have a feeling that they are also feeling the squeeze from Amazon. Many households treat Prime as a fixed cost but the 20 minute drive out to Walmart is a real expense that can be substituted with Amazon purchases. Tonight's earnings will be interesting. Compare to eg Visa [1]. I expect that the "last hoorah" spending of this summer will grind to a halt in the winter and by Q2 2023 we'll be able to see a massive decline in consumer spending during Q4 in particular. But we aren't there yet, at least in aggregate, because consumers are spending like mad on services. [1] https://www.reuters.com/business/finance/visa-quarterly-profit-jumps-unrestrained-consumer-spending-2022-07-26/ https://www.reuters.com/business/finance/visa-quarterly-prof...

p_j_w 4y ago

>I'd cite the WSJ but for some reason I can't paste the link in this box, just Google "falling demand Wal-Mart" I'd rather not base my picture of the entire economy around a single retailer. What's going on with other retailers? Amazon, Best Buy, Target, etc? Have they more than picked up the slack that Wal Mart is seeing?

InefficientRed 4y ago
> I'd rather not base my picture of the entire economy around a single retailer Or retailers in general. Retail spending is down because services spending is up -- people are going to the beach and buying plane tickets instead of buying TVs and patio furniture. Regardless of whether we're in a recession, retailer numbers aren't a good indicator for the duration/depth/type. We spent all of 2020 hearing that demand was pulled forward. Well, it was pulled forward from somewhere, and now we are there. > What's going on with other retailers? Best Buy missed by a lot; sales down by over 10%; forecast was a 1% contraction. Amazon tonight. Always complicated because of AWS, digital content, and now a substantial advertising business. If you want the retail details you have to go past the headline numbers. Target in mid-August but expectations are similar. My guess is that none of those companies will be hit has bad as Walmart because (1) Walmart was just particularly badly mismanaged, and (2) these other companies are just different in kind (particularly Amazon -- they could eg suffer retail losses while beating estimates on Advertising/Cloud)
- p_j_w 4y ago
  >Or retailers in general. Retail spending is down because services spending is up -- people are going to the beach and buying plane tickets instead of buying TVs and patio furniture. >Regardless of whether we're in a recession, retailer numbers aren't a good indicator for the duration/depth/type. We spent all of 2020 hearing that demand was pulled forward. Well, it was pulled forward from somewhere, and now we are there. All fair points. >Best Buy missed by a lot; sales down by over 10%; forecast was a 1% contraction. Ouch.