Not just discretionary spending, but spending on staples has collapsed. Folks, this is a recession. It’s already here.

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In the midst of mounting economic pressures, American consumers are feeling the squeeze as both discretionary spending and spending on essentials collapse. This isn’t just a warning sign—this is a recession. It’s already here, and the evidence is all around us.

For those hoping for a brighter financial outlook, the recent performance of retail giant Target serves as a stark wake-up call. Target’s stock, $TGT, has plummeted 8% following weaker-than-expected earnings, with a 3% revenue decline highlighting the fragility of consumer strength. CEO Brian Cornell pointed to “continued soft trends in discretionary categories” as a key factor in this downturn.

The numbers are telling:

  • Declining Store Traffic: Target saw a 1.9% drop in store traffic last quarter, a clear indicator that consumers are cutting back on shopping trips.
  • Reduced Spending Per Visit: The average amount spent by customers also fell by 1.9%, reflecting a cautious approach to spending.
  • Fewer Purchases of Essentials and Extras: Consumers are not just buying fewer discretionary items like electronics and clothing, but they are also cutting back on everyday staples such as groceries. This marks a significant shift in consumer behavior driven by financial strain.

Target’s struggles are a microcosm of a broader trend. Same-store sales fell by 3.7%, underscoring a significant reduction in consumer spending power. Inflation has played a critical role in this downturn, as rising prices erode the purchasing power of the average American. This isn’t just about discretionary items; even essential goods are feeling the pinch. With inflation driving up costs, people are making tough choices, often opting for cheaper alternatives like switching from beef to chicken.

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For months, analysts and economists have cautioned about weakening consumer spending, but the reality is now undeniable. The US economy has lost 192,000 jobs in Q3, a dramatic drop that has only occurred during recessions over the past 30 years, according to Business Employment Dynamics data covering nearly 5 million firms and over 100 million jobs.

The implications of these trends are profound. As consumers tighten their belts, businesses face shrinking revenues, which can lead to further job losses and economic contraction. The cascade effect of reduced spending impacts everyone, from major corporations to small businesses and individual workers.

Analysts who downplayed these warning signs will have much to answer for in the coming months. Many investors have been lulled into a false sense of security, only to find themselves serving as exit liquidity for the big players who saw the writing on the wall.

The harsh truth is that the US economy is on a precipice. With inflation taking its toll and consumer spending in freefall, the signs of a recession are not just on the horizon—they are here, reshaping the economic landscape in real-time. The question now is how deep this downturn will go and what measures can be taken to mitigate its impact.

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Sources:

“They’ve been heavily discounting prices not because inflation for beef is too high but is going on purchased, people are switching to chicken and these are simple facts of life. If the money is not there in your paycheck, you are not going to buy it.…”

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