Just when things were looking up — consumer spending so far this season has been strong, profit margins are widening, COVID rates seemed to be declining — the retail industry finds itself in the path of yet another economic cyclone.
This may be a merry season, but other, foreboding news raises the specter of a post-holiday hangover to remember.
A mountain of seasonal merchandise remains trapped in the supply chain along with merchandise for future seasons. Where to put it all has sparked such a boom in the warehouse business that space has become scarce and expensive. As we discussed in a previous posting here, the usual solution for an inventory glut is to blow it out with deep discounts. The beginning of the new year will be a good time to get a great deal on a television or a pair of high-design “sustainable” shoes.
The Federal Reserve Board recently dropped “transitory” from its discussions on the rapid rise in inflation.
By most measures, the damage to consumers’ wallets and confidence has already been done. The University of Michigan reported that its U.S. Consumer Sentiment Index tumbled in November to a 10-year low. Consumers say things haven’t been this bad since the 2008 mortgage crisis and the Great Financial Meltdown. People may be in the mood to spend today, but what about next month when the bills arrive?