Wal-Mart Results Reveal Shaky Consumer Confidence

While the state of the economy of a number of European Union countries continues to be a cause for concern, and the Euro continues to flounder, US stock market players will no doubt be turning their attention to their home ground as they face a flood of reports indicating the economic health of the United States in the coming week. Among the reports expected this week are key readings on labor, individual income, housing, consumer sentiment and spending trends, and the country’s GDP.

Following its last peak on 26 April, the Dow Jones Industrial Average had dropped 9 percent as recorded at the close of business on Friday 21 May. Similarly, the S&P 500, which last peaked on 23 April had lost 10.6 percent, with the Nasdaq losing 11.9 percent since peaking on the same date. Markets are now considered to be in a correction phase, with varying opinions as to how long this phase will continue, and what comes next. Looking at some of the areas which are fairly reliable indicators of the health of the economy, there is reason to believe that the road to recovery is going to be long and rocky.

With regard to the jobs market, in the last six month employers have added more than a half-billion jobs. Many consider this to be great news – and it is, especially for those who have been employed – but taken in the context of the 8.3 million jobs that have been lost in the past two years or so, it is a drop in the ocean. The unemployment rate remains close to 10 percent, while the underemployment rate is over 17 percent.

The fact that household budgets are stretched to the limit is further confirmed by the disappointing first quarter results posted by retail giant Wal-Mart, which revealed that although growth in international sales pushed revenue up 6 percent, sales at stores in the United States dropped 1.4 percent compared to the same period last year. Wal-Mart‘s chief financial officer Tom Schoewe put the situation in a nutshell, saying: “More than ever, our customers are living paycheck to paycheck.” So, although retailers like Saks, Home Depot and Target released surprisingly pleasing first quarter results, it is generally agreed that both the economy and consumer confidence remain on shaky ground.