Picture of the Day: Consumers Aren't Drunk. Is CNN?

In a prescient online piece last week, CNN reported that U.S. consumers are no longer spending like drunken sailors. This morning, we got the numbers to back up that assertion.

Gone, it seems, are the halcyon days of February, when retailers could count on U.S. consumers outspending any increase in their salaries by a factor of 10. For three months running, we've kept a tight rein on our wallets. We're still increasing spending, but much less swiftly than our income has grown:

But can you blame us? The rate of increase in paycheck-size has been dwindling, too. Industrial leaders such as Caterpillar (NYSE: CAT  ) , United Technologies (NYSE: UTX  ) , and Textron (NYSE: TXT  ) may be rolling in dough, and posting profits ahead of predictions. But down here on Main Street, we're already hearing rumblings of production cutbacks and rising inventories, as consumers cut back on spending and retailers reduce orders accordingly.

The trouble with sober sailors
CNN may fret, but I believe that consumers' penny-pinching is a logical reaction.

I know that with back-to-school season in full swing, merchants like OfficeMax (Nasdaq: OMX  ) and Wal-Mart (NYSE: WMT  ) hope we'll open our wallets and spend big. I've seen their sales circulars, and I understand their concern -- the single-digit sales gains of previous quarters might not suffice to support their double-digit P/Es.

Why, then, are so many successful companies on Wall Street sitting on their own piles of cash right now? Apple (Nasdaq: AAPL  ) and Cisco (Nasdaq: CSCO  ) are each hoarding treasure troves of around $40 billion. If corporate America thinks it's prudent to clutch its cash right now, I wouldn't blame consumers for taking similar precautions.

If consumers aren't spending like drunken sailors anymore -- good for us! We've taken a cold, hard, sober look at the economy, and we're taking prudent steps to guard against another downturn.

That's my take on BEA's latest facts and figures. What do you think? Share your opinion in the comment box below.

Wal-Mart is a Motley Fool Inside Value pick, and Apple is a Motley Fool Stock Advisor recommendation, but Fool contributor Rich Smith does not own shares of any company named above. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 03, 2010, at 7:46 PM, hawkise wrote:

    I'm a Sailor and I have been drunk with many of my Marines and I do not like being compared to the consumer. I hate shopping and Malls.

    Therefore It will be another Internet highway Christmas with my bottle of burgundy while avoiding a DUI.

    Good article!

  • Report this Comment On August 04, 2010, at 1:00 AM, TMFDitty wrote:

    What shall we do with the drunken sailor...?

    [Humming

    Send 'im to Wal-Mart with a maxed out Visa

    Send 'im to Wal-Mart with a maxed out Visa

    Send 'im to Wal-Mart with a maxed out Visa...

    Early in the morning!

    Can you do better? Feel free to ad lib your own, Fools.

    TMFDitty

  • Report this Comment On August 05, 2010, at 4:50 AM, hawkise wrote:

    Yea but it' Your Maxed out Visa

    And the Sailor was Celebrating the fact he sold "V" in May and sailed away!

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