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Walmart Lowers Sales Forecast, Confirms Economy Is Slowing

Walmart cut its forecast for profits and sales for 2013. The significant element was that actual reported sales at USA stores open at least a year fell 0.3% (a fifth consecutive decline).

Now read the Econintersect economic forecast for August 2013 which again declined, seeing the economy barely expanding. The concern is that consumers are spending a historically high amount of their income, and several non-financial indicators are struggling or flat.

I have been on this "consumer is in trouble" rampage for 3 months. Consider:

  1. Part of the lower sales at Walmart is substituting beans for steak - but I am afraid many are doing without a new TV or smartphone or refrigerator.
  2. If you realize that the population is growing at 1% per year, and a larger and larger portion of the middle class is slipping into the lower class - and Walmart is the store of choice for this segment of the economy - any decline is alarming.

We are seeing negative median per capita spending growth. Can I prove this? - NO. Median income information is not available, and the little data we have suggests that the 1% are the real drivers of disposable income growth.

The ECRI WLI growth index value has been weakly in positive territory for over four months - but in a noticeable improvement trend. The index is indicating the economy six month from today will be slightly better than it is today.

Current ECRI WLI Growth Index

Initial unemployment claims grew from 333,000 (reported last week) to 320,000 this week. Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate.

The real gauge - the 4 week moving average - improved from 335,500 (reported last week) to 332,000. Because of the noise (week-to-week movements from abnormal events AND the backward revisions to previous weeks releases), the 4-week average remains the reliable gauge.

Weekly Initial Unemployment Claims - 4 Week Average - Seasonally Adjusted - 2011 (red line), 2012 (green line), 2013 (blue line)

Bankruptcies this Week: Anchor BanCorp Wisconsin

Data released this week which contained economically intuitive components (forward looking) were:

  • Rail movements growth trend is currently accelerating.
  • Retail trend lines may be changing for the good.

All other data released this week either does not have enough historical correlation to the economy to be considered intuitive, or is simply a coincident indicator to the economy.

Weekly Economic Release Scorecard:

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.