Consumer Spending Slumps Even With Back-to-School Underway; Cisco, IBM Sales Suggest Corporate Spending Slowdown

A new Gallup Poll shows Spending Slumps Even With Back-to-School Underway

Americans' self-reported spending in stores, restaurants, gas stations, and online averaged $62 per day during the week ending Aug. 8. Early August consumer spending trends trail 2009 and will need to surge to match last year's anemic back-to-school results.



Gallup's weekly spending measure for the first week of August shows no improvement over that of the last week in July or that of the same week a year ago. In turn, this suggests that back-to-school sales are unlikely to substantially exceed last year's depressed levels. In fact, this week's comparable of a year ago was a big spending week, making for challenging sales comparables for many retailers this year.

Corporate Spending Slowdown

Bloomberg reports Cisco, IBM Sales May Signal Slowdown in U.S. Corporate Spending

Weaker-than-forecast sales at Cisco Systems Inc. and International Business Machines Corp. may signal a slowdown in the corporate spending that has led the U.S. recovery.

�It�s been business investment, particularly technology, that�s been in the driver�s seat,� said Stuart Hoffman, chief economist at PNC Financial Services in Pittsburgh. Should equipment spending slow significantly, �unless something else picks up the pace, it means the outlook for the economy is going to be that much dimmer.�

Corporate investment is among the few remaining sources of economic growth as the effects of government stimulus measures wane and unemployment remains stuck near a 26-year high. Economists this week cut their forecasts for the second half of the year as the more than 8 million jobs lost during the recession hamstring consumer spending.

San Jose, California-based Cisco yesterday said revenue in the current quarter will be $10.64 billion to $10.83 billion, compared with a $10.95 billion median estimate in a Bloomberg survey. The stock fell as much as 12 percent in intraday Nasdaq trading today

IBM, the world�s biggest computer-services company, last month reported revenue that missed analysts� estimates, citing a decline in services-contract signings. Signings fell 12 percent to $12.3 billion, the second straight quarterly drop in contracts for services, which make up more than half of IBM�s total revenue.

GDP is increasingly likely to be negative at least one quarter in the second half yet few economists even discuss the possibility.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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