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5 Signs That U.S. and World Economy is in Trouble

By Eowyn @DrEowyn

1. U.S. Retail Sales Collapse

In post-industrial America, the economy depends on and is driven by consumerism, i.e., retail sales.

But those sales are tanking.

Bloomberg reports, Jan. 15, 2016, that after an anemic gain of 0.4% in November 2015, retail sales in December actually fell 0.1% — in spite of lower gas prices and the “holiday” Christmas buying frenzy on which retailers traditionally rely to lift them into the black.

For all of 2015, purchases climbed only 2.1%, making 2015 the weakest year since 2009, the trough of the Great Recession.

U.S. retails sales 2007-2015

The retail sales collapse affects 6 of 13 major categories, including grocers (!) and the following:

  • 1% drop at general merchandise stores.
  • 1.1% drop in receipts at gasoline stations, from the drop in gas prices.
  • 0.9% drop in sales at clothing chains.
  • 0.2% drop in sales at electronics stores.

Analysts say the slowdown indicates Americans probably preferred to sock away the savings from cheaper fuel instead of splurging during the holiday season.

2. Most Americans have less than $1,000 in savings

That is only sensible, given the fact that most Americans — a whopping 62% — have less than $1,000 in their savings accounts, and 21% don’t even have a savings account, according to a new survey of more than 5,000 adults conducted last month by Google Consumer Survey for personal finance website

That means many Americans have no emergency savings for things such as a $1,000 emergency room visit or a $500 car repair. Faced with an emergency, they say they would raise the money by reducing spending elsewhere (26%), borrowing from family and/or friends (16%) or using credit cards (12%). (Read more here)

3. U.S. Industrial Production Collapse

It is not just retail sales that are tanking. U.S. industrial production plunged 1.8% year-over-year (2014 to 2015), which is the fastest pace of collapse since May 2008 when the Great Recession began. Historically, a 1.8% year-over-year decline in industrial production has never not produced a recession. (Source)

U.S. industrial production 1971-2015

4. Hundreds of Wal-Marts to be closed

The collapse of retail sales is also seen in retail giant Wal-Mart‘s decision to close hundreds of stores.

The AP reports, Jan. 15, 2016, that with 11,000 stores worldwide and a global workforce of 2.2 million, the world’s biggest retailer Wal-Mart is closing 269 stores, more than half of them (154) will be in the U.S., including 102 smallest-format stores called Wal-Mart Express, which were opened as a test in 2011.

Altogether, 16,000 Wal-Mart “associates” will be laid off, 10,000 of whom in the United States.

The closures will begin at the end of this month, January.

Wal-Mart has 4,500 stores in the U.S., with 1.4 million employees. The stores being shuttered account for less than 1% of Wal-Mart’s global revenue.

More than 95% of the U.S. stores set to be closed are within 10 miles of another Wal-Mart. The Arkansas-based company said it is working to ensure that workers are placed in nearby locations.

The announcement comes three months after Wal-Mart Stores Inc. CEO Doug McMillon told investors that the world’s largest retailer would review its fleet of stores with the goal of becoming more nimble in the face of increased competition from all fronts, including from online rival McMillon said in a statement: “Actively managing our portfolio of assets is essential to maintaining a healthy business. Closing stores is never an easy decision. But it is necessary to keep the company strong and positioned for the future.”

minimum wage increase

ZeroHedge points out that Wal-Mart’s troubles began when “the world’s largest retailer bowed to pressure to raise wages for its lowest-paid employees…. In short order, it became apparent that the reverberations from the $1.5 billion endeavor would spell trouble for the company.” When the retail giant’s efforts to squeeze the supply chain failed to plug the gap, the company resorted to store closures, job cuts and reduced hours.

5. Global economy in trouble

Even more frightening are signs that the economic slump is not just in the U.S., it is worldwide, as indicated by continued collapse of the Baltic Dry Index, which shows the global economy seems to be grinding to a halt. (Source)

The Baltic Dry Index is an assessment of the price of moving major raw materials by sea. As such the Index is an indicator of global trade because raw materials and most manufactured goods are transported by sea. A steep and continuing drop in the Index means goods aren’t being hauled by ships because factories aren’t buying and retailers aren’t stocking.

Baltic Dry Index 1985-2015

SuperStation95 (95.1-FM, New York, NY) reports on Jan. 8, 2015, that the North Atlantic appeared empty of cargo ships in-transit. The ships instead were anchored along the North American and European coasts, with few or none moving.

cargo ships in North Atlantic

SuperStation95 explains:

Commerce between Europe and North America has literally come to a halt. For the first time in known history, not one cargo ship is in-transit in the North Atlantic between Europe and North America. All of them (hundreds) are either anchored offshore or in-port. NOTHING is moving.

This has never happened before. It is a horrific economic sign; proof that commerce is literally stopped

The reason commerce has stopped is simple: People are not buying things.   When people do not buy things, retailers do not sell things, so they do not order more goods for stock.

When retailers do not order goods, manufacturers don’t make anything because there are no orders to fill.  When manufacturers do not make goods, they don’t order raw materials for manufacturing.

When there are no orders for raw materials, commodities sellers do not sell raw materials. When no raw materials are sold, there is no shipping by large cargo ships, (or railroads or tractor trailers) to move anything.

Put simply, the global economy is LITERALLY stopping.  Right now.  Today.

A snapshot taken by and posted by ZeroHedge seemed to show a dearth of cargo ships in transit across the world.

Marine Traffic

Sorry for the bad news, folks, but it looks like we are heading toward very rough waters.

H/t FOTM‘s josephbc69


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