The Commerce Department just released inventory numbers for th nations retailers, higher by 0.2%. Couple that with a sales drop of 5.9% and you have an inventory to sales ratio at new record highs.
Look at this madness.
For the life of me, I can’t figure out where the money is going. Gasoline prices are down. Everything is cheap and made in China. Have we reached a point of ‘peak junk’? Is everyone so loaded with stuff that we don’t really have a desire to buy more of it?
Or is there a demographic shift taking place, with a less materialistic snapchat generation more fixated on taking selfies than actually looking good in them?
Why aren’t humans buying clothes anymore?
Is it because we’ve spent all of our disposable income on 90k cars and $1,700 per mo healthcare plans?
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Maybe more kids living at home still spending their parents money but living like high school than a person starting out who intends to grown their own wealth and family?
Why buy a car when you can borrow?
Why buy food when mom just buys more of the same?
Why buy a TV when there’s 3 where you live?
There’s a generational shift. Younger people are buying into the propaganda that everything is better now and utopia is just around the next vote.
Exactly. I have reached the conclusion that just about every retailer is a short.
Driving around the South for the first time in my life last week I noticed some things:
There are a lot of new, decked out pick up trucks. Many of them have the bed filled with what look like all of the driver’s possessions in the world. Sometimes a trailer with more. Anyway they seem to be moving. Kind of limits what you can accumulate – plus $800+ a month for the truck is a big ask when the median income is like $30-36K.
Housing is killing growth in the the above purchases you mentioned. I am house hunting. Astounded at the garbage that greedy baby boomers are offering between 300k & 400k in a rural part of Central Pa.
Move to Litiz,pa
Funny……I currently live it Lititz. Named best small town in US and craft beer capital of the east coast.
Epic. LOL.
Agree! My first thought as I read the post was… housing, duh. Millennials in urban Chicago (as well as NY, LA, SF) are spending 60-70% of their monthly income on rent.
Yeah, my nephew, who granted makes a damned good salary, is currently living in San Fran and his rent for a one-bedroom is three times my mortgage in Fairfield Cnty CT.
Nocturne you have some thinking to do, and best wishes to you. Buying in a priced to perfection market that is nowhere near as liquid as most stocks. Yes the crap is priced up. Around here 200 K places are 350 to 400 K.
Most have the same tacky renovation that looks like it was done with the crap from Home Depot, by low class people with no taste, sense of design or an understanding of why or how.
In terms of the retailers the money is going to fast fashion brands like H&M, Forever 21, Zara, etc. These stores have new inventory every time the millennials stop by – you know, kinda like how this site has new articles by The Fly every time I stop by (the internet is mad fucked up).
So it’s not really that the malls are dead, it’s just brands that used to make money off of putting their name on their shit (i.e. gap, etc) that’s not what people are buying anymore. People want to go to Urban Outfitters and get some funny sexy slogan now
No, you’re wrong. The mall is dead. H&m isn’t making up for sakes drops in the other 100 stores there. Are you mad?
$55 for a sweatshirt that says “GAP” vs $20 for the same thing with no brand name on it? Hmm… let’s think about this.
Sure overall spending is down but when we buy we buy cheap – see other comments.
H&M, Uniqlo, etc. definitely killed GAP. GAP spams 40%-50% coupons all the time now, but even then it can’t make up for their lack of style.
Sales*
Maybe people don’t have a job so they don’t have disposable income and don’t have anywhere to drive so they are not saving money on gas? 90% of income goes to cell phone bills and internet?
but the unemployment rate is 5%…. http://data.bls.gov/timeseries/LNS14000000
Which excludes about 10% of the population that is not looking for work anymore because discouraged in the feels or structurally underemployed as “not in labor force”
Mickey D’s and Wal Mart jobs should not count, that number would hover somewhere around 15%
Found this for $825
https://www.redfin.com/MI/Detroit/5572-Kensington-Ave-48224/home/61343826
Detroit, MI but jesus.. I could buy this for less than a new dishwasher.
I’m sure that picture isn’t recent?
Murder house?
Marc you know a house at that price reflects comparable market value minus the cost of obligations and things necessary to bring the house up to the occupancy condition.
That little gem was a rental. Maybe Detroit is done in terms of housing opportunity. Lots of homes bought up and are higher than sale values. Now it’s just the dogs left over that would have a lot of work.
rent and student loans….
rent, student loans…. And the weed man.
Millennials are going to start driving the way of life soon. They buy their clothes at TJ Maxx. They furnish their apartment thru Home Goods and IKEA. They spend their little discretionary income on experiences. Travel to new destinations, unknown restaurants, bars, sporting events, concerts, movies. They take an uber to all these places. They surf tinder for a person to sleep with for a weekend or two. Rinse repeat.
http://gizmodo.com/this-painful-chart-says-how-many-people-are-younger-tha-1775705797
It’s demographics
Nailed it.
I think it’s generational in that baby boomers are spending a lot less and other generations, particularly the 20-35 year old demographic, cannot make up the loss.
Low rates lowers income for baby boomers and older generations since they keep a lot of their assets in CDs, bonds, etc. At the same time they are most exposed to the rising cost of healthcare and thus are spending less wherever else they can.
I think it’s natural for discretionary spending to fall as people age, but we now have the next generation saddled with student debt, and high living costs in urban areas so they can’t make up that gap as we have become accustom to with previous generations.
There’s probably more to it than that, but I think it’s the primary driver.
+1 to the raconteur
Agree
On point, but one thing I differ on: I suspect that
1) boomers are much more heavily invested in stocks vs bonds than previous generations: no yield, under invested for retirement and trying to cathc up, faith in long term market returns from 80s and 90s
2) millenial don’t trust te system and have seen 2 huge crashes, so they are likely less invested in the market (vs bonds, cd, etc) than boomers were at their age.
This, of course, means less buyers for what the boomers will be selling in the coming years
Most people over the age of 50 I speak with are not heavily invested in stocks and to the extent they are it’s because of the lack of yield available elsewhere. Most of the time I hear concerns about another market drop and these people would rather give up the potential upside now to avoid the downside later. This makes sense after 2008-09. I don’t know if there’s data available to show asset holdings by age bucket but that would be interesting to see.
I agree with you on young people not investing. I’m 26 and nearly all my friends keep most of their wealth in cash or CDs. Seems partly due to skepticism and part due to laziness. Investing use to be fashionable and what successful people did, or at least that’s the impression the general public had. Now most young people hate Wall Street and are instantly distrustful of anything or anyone related to investing.
” to the extent they are it’s because of the lack of yield”
Well…yeah…just like every other market investor.
So what is generally the highest-yileding sector? Utilities.
What sector has the best 1 year and 6 month perforamnce? Utilities
Not a coincidence. People are flocking to high-dividend stocks, ignoring the capital-risk exposure. High yield bonds are also doing well (with the bonus of a bid from the ECB), but I think that will end in tears as well.
Materialism is dead, we are in the new era Experiencism. It requires less resource consumption and is mainly travel and entertainment both live and online.
Weed and porn are experiential.
Totally generational. Millenials are just as big as boomers, but spending is oh so different for several reasons:
1a) Boomers in their 20s and 30s could throw darts and pick good stocks -> they have faith in the system
1b) Millenials saw two horrendous market crahes during their foramtive years and see that the jobs they were promised with a BS degree aren’t there -> they support Berne even more than Obama in ’08. They put their money in conservative investments, not banks
2a) Boomers had rising houses prices, and falling rates
2b) Millenials ahve high rents and can look forward to interste rates eventually crashing the party
Evidence of the attititdues can be seen in major purcahses:
1) Boomerar NOT downsizing into retirement, as evident by the data (some of this is likely due to grown kids at home)
2a) The average age of new car purchasers is on a long term rise, bascailly it’s wahtever age the boomers are
2b) Millenials don’t even bother to get dricing licenses -> they dove UBER’s rise and will also push automated vehciles. The smartphone replaced the car as the “pride purchase” for millenials
3) As matt pointed out, they spend on expereinces, not possessions (total boomer opposite)
For a time I was in the travel biz.
The Germans French and Italians were
long on experiences and the yanks were
big on stuff.God forbid were now like the
French.
Credit card debt / student loans
Additionally Millennials could be spending on experiences and “rental” things like Uber and streaming and data costs. It could be the economic effect of an experience generation instead of another ownership generation.
Oops, I see several of you already made the point.
My theory is that it’s a combination of anemic wage growth and very expensive necessities/essentials (sans gasoline). Healthcare costs are ridiculously high; home prices are back with a vengeance and rental rates are at all time highs; and the grocery bill is out of hand, I spend so much money at the grocery store. Lastly, a lot of the people that actually have money, i.e., the Baby Boomers, are saving big time and do not want to spend, due a lack of safe yield anywhere.
Agree. Since the housing bubble, rent in our area (70 miles south of Chicago) has risen 18%. Housing prices are rising once again. Healthcare costs are a killer, either through employers, or self-employment, or retirement. A “cute” little outfit for the granddaughter can run $30 easy. As a baby boomer, we’re trying to preserve our savings. No one is going to take care of us, but ourselves. I’m not ashamed to tell you I am frugal with our money. I clip coupons and use sale flyers for purchases. As someone else pointed out, at our age, we have everything we need; and most of our friends are trying to downsize in both material things and housing.
Where has the disposable income gone? I won’t try to explain short-term changes, as a lot of that is noise, but, over the long-term, an increasing share of income has gone to people who can’t possibly spend it all and so accumulate it as wealth.
The middle 60% of households have seen essentially zero growth in wage income over the past 30+ years. The bulk of the increases went to the top quintile. Within that quintile, the rate of increase was higher the higher up in the quintile you look.
Prior to that period, there were about 4 decades when the share of income going to the top 10% in the US remained very stable. Most households participated in the overall growth in income in the country.
Wealth has rapidly accumulated at the topWealth has rapidly accumulated at the top, while the bottom 40% are barely treading water. The linked figure shows the bottom 80% treading water, but it has a 2010 end date that doesn’t reflect a recovery in home values in most of the country.
The rising cost of healthcare is one of the factors affecting wage growth and, to a lesser extent, disposable income:
Employees continue to shoulder an increasing percentage of healthcare expenses. The total employee cost (payroll deductions plus out-of-pocket expenses) increased by approximately 43% from 2010 to 2015, while employer costs increased by 32%. Of the $24,671 in total healthcare costs for this typical family, $10,473 is paid by the family, $6,408 through payroll deductions, and $4,065 in out-of-pocket expenses incurred at point of care.
Fly is pretty late to the table with his grumbling about healthcare costs. The rate of increase in that area is much slower in recent years than in much of the past 20 years..
Thanks for all the stats pertinent to this situation, Ottnott. Looks like nobody has any money for discretionary spending except those at the very top, who can’t possibly spend it all.
It going into weed and rusian porn.
Fly, I really believe that yoga pants have made fashion obsolete. Who cares about buying a pretty blouse when a standard, black yoga pant is equally as powerful as attracting male attention.
Dude, plus one. I’m actually sick of this it’s like so lazy. 2 out of every 3 women at the grocery store are in athleisure wear aka pajamas because you know you didn’t just come from the gym girl!
+ 1,000. Yoga pants done killed retail. I’m stealing that for sure.
Does Amazon skew the inventory to sales ratio? How are online retailers included in the numbers?
My daughter is 20, and buys a lot of things online (not just clothes; makeup, toiletries, accessories) because her size is average for a woman and she doesn’t have to try things on as much. She also sells clothes online she no longer wants.
The chart looks like it has followed the market’s movements. When times seem good, order too much, put it on sale, and still make a profit.
+1
Gotta add daily morning Starbucks and Dunkin to the list too. I bet the average person spends at least $100 a month.
I’ve seen some very disturbing footage on YouTube showing mind-blowing mob violence in malls. If I had young kids I would not let them anywhere near a mall. And then there are the fuckwits who go in armed. Unemployed youth LOVE to hang around in malls.