Consumer Spending - Retrenchment

Economics - Consumption

Consumption - Americans claim to be less interested in spending than at any time in last 4 decades (credit crisis, recession); will low prices still draw consumers? (Black Friday - from red ink of losses for year into black ink of profitability for retailers); 3Q 2008 - Commerce Department reported personal consumption spending, adjusted for inflation, fell at 2.7% annual rate, (biggest decline since 2Q 1980 which was helped by tax rebates from stimulus package); economy contracted 0.5%; Conference Board reported 1.9% of respondents (to its 40-year monthly survey of major-items purchase plans for next 6-months) planned to buy a house (lowest since 1982, double-digit interest rates - see below), 3.7% planned to buy a car (lowest in 40 years vs. previous low of 4.5%), 1.3% planned to buy a new car (lowest in 40 years), 8.8% think jobs are easy to find (lowest in 15 years).

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Digital Music Milestone

Entertainment

November 26, 2008 - Atlantic Records, unit of Warner Music Group, said 51% of its music
sales in United States are now from digital products (downloads on iTunes, ring tones for cellphones, ringbacks, satellite radio, subscription services); first major record label to hit milestone; 4Q 2008 - digital represented 27% of its Warner's American recorded-music revenue; digital revenue for full fiscal year rose 39%, to $639 million, or 18% of company’s total revenue; 2013 - music sales in United States will decline to $9.2 billion,
from $10.1 billion in 2008 (source: Forrester Research), $14.6 billion in 1999 (source: Recording Industry Association of America); 2009 - NBC expects $1 billion in digital revenue (2007 revenue more than $15 billion); Time Inc., largest magazine publisher, about 9% of
its $2.2 billion revenue in first half of 2008 derived
from digital; online revenue accounted for 12.4% of New York Times overall revenue.


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Stock Market - Worst Year Ever?

2008 - Stock Market on track for worst year since 1931:

1) November 21, 2008 - S & P 500 index traded to an intraday low of 741.02 = down 47.5% from 12/31/2007 close of 1411.63 (down 45.52% year-to-date);

2) 1931 - Dow Jones Industrial Average fell from 164.50 on 12/31/1930 to 77.90 on 12/21/1931 (down 52.64%), to 41.22 on July 8, 1932 (down 89% from September 1929 high); closed at 60.32 on December 30, 1932)

3) 1937 - DJIA closed at 120.85 on December 31, 1937, down 32.8% from 179.90 at the end of 1936

4) 1974 - worst post-Depression
year, until now; S & P 500 lost 29.7% (down to 68.56 from 97,55, worst postwar recession year);

5) October 2008 - worst-ever monthly point decline for the S&P 500, 8th-worst percentage decline.



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Crisis of Confidence for U.S. Consumers

November 12, 2008 - Sales of new vehicles have dropped 32% in the third quarter 2008. Consumer spending appears likely to fall next year for the first time since 1980 and, perhaps, by the largest amount since 1942. 1950s through the 1980s — Americans spent about 91% of their income, on average, and put away the rest. Last few years - Americans have spent close to 99% and saved only about 1%.



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