Andrew, Pete...Help me out here.
When Wal-Mart this week reported a better-than-expected 3.2 percent increase in same-store sales, many on Wall Street said it was a sign that consumer spending was picking up.
That doesn't seem right to me.
My impression is that Wal-Mart is the shopping equivalent of what economist's call an "inferior good." This is not a qualitative comment on the store or what it sells but rather an economic observation: people are more likely to shop more often at discounters like Wal-Mart when times are tough and they're watching their pennies.
(ironically, the example that was used when I first learned the inferior goods concept was that consumers would shift from meat to potatoes and rice when their income fell. In light of the current increase in the price of rice, my guess is that it's no longer included on this list.)
So here's my question: Isn't it at least as likely that the increase in sales at Wal-Mart are a sign that things are not getting better?
Wall Street spinmeisters
"Wall Street said it was a sign that consumer spending was picking up"
Wait -- you aren't talking about the Wall Street investment banks like Citi -- the one that just announced they'll be selling 20% of the their assets to cover some of their losses? Or any of the others with many billions in recent write downs ?
Naw . . . they wouldn't be desperate to prop up the equities markets . . . no way!
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