Why Worry About Walmart?

Walmart has an overstock of inventory, and this is a really, really bad indicator of the economy and socioeconomics. As a result, Walmart is doing something that it has never done, not even in the middle of the financial collapse; cutting back supply. This gives me a new chart to play with.

Remember: Walmart reported net sales of $443 BILLION last quarter. The GDP of Austria in 2012 was only a mere $399 Billion. Walmart is richer than one of the most vibrant economies in Europe.

This means consumption is going down – or in economic speak: “Aggregate Demand”. You don’t have to be a Keynesian to see where this is going.

PCE earnings

As I’ve written many times, when spending outpaces earnings when people use credit for basic needs. It looks like we’re on another swing of the dizzying economic pendulum where people are just tapped out.

People haven’t been spending for a while. However, the recent phenomenon begs the question: are the constrained wages and constrained hours, leading to constrained earnings of workers finally catching up with the economy? In fact, CNBC, while taking their usual myopic views of the world, has today’s headline as: “Will the consumer kill the rally?” (video)

So I’ll address the devils out there, who may say that Walmart’s competition is killing it. Macro data shows something different; and remember – Walmart outpaces the GDP of Austria. Not even, well, Austria can effectively compete with Walmart.

Even the shortsighted echo chambers of CNBC acknowledge that the consumer of low-end retail has been hurting since, well, the “recovery.” The “low end” is were 99% of people sit.

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