The Wal-Mart Index
The Starbucks Latte Index often gets cited as an indicator of whether consumers are cutting back on discretionary spending – if they give up expensive coffee drinks, the thinking goes, they’re serious about saving money.
But if you really want to know what’s going on with consumer spending on everyday necessities, the best place to find out is Wal-Mart.
By that standard, things are pretty bad and getting worse, according to Eduardo Castro-Wright, Wal-Mart’s president of U.S. retail operations, as quoted by Reuters. People are increasingly clustering their purchases around paydays, meaning they’re particularly stretched. In the saddest indicator, they’re even waiting for that paycheck to cover very basic food needs — like baby formula.
The use of credit cards to pay for purchases at Wal-Mart stores is also declining, because people are maxed out and can’t access any more credit, he said.
In a “disturbing” trend, Castro-Wright said Wal-Mart for the first time is seeing a paycheck-related spike in sales of baby formula, suggesting consumers are rushing to buy such necessities as soon as they have the cash.
“Most consumers are worried about: ‘Will I have enough to put food on the table so my family can eat?’” he told attendees of a luncheon sponsored by Town Hall Los Angeles.
I can’t help contrasting the cash-strapped customers of Wal-Mart, holding off on buying food for an baby, with the AIG executives reaping eight-figure bonuses in the midst of their government bailout.