January 15, 2008
Thanks, Citigroup: A Weepy Day On Wall Street
In case anyone has any lingering doubts, the U.S. economy is teetering dangerously close to recession. The latest evidence: Citigroup actually managed to surprise with its 4Q 2007 results today, in an environment that already expects the worst.
Now, for the really dire news: Rich people are pinching pennies.
Middle class stagnation is by now the natural state of things in the American economy. That those consumers are exercising caution is to be expected, particularly as gas prices skyrocket. But when the wealthy start trimming back on their Louis Vuitton and Tiffany purchases, you know something is afoot.
According to a report in this morning's New York Times, high-end retailers Nordstrom, Saks Fifth Avenue and Tiffany experienced a marked slowdown in sales last month.
The rate of spending by American Express' customers, "a generally affluent group of consumers," fell from 13 percent growth to 10 percent growth, "the first slowdown since the 2001 recession," according to the Times report.
That's right, folks. Even Marty Scorsese is holding back.
Americans' credit addiction is the proverbial rolling boulder threatening to flatten the economy. Of Citigroup's 4Q earnings report, Fortune's Colin Barr notes: "The bank said its domestic consumer lending business swung to a $1.2 billion loss in the latest quarter from a $484 million profit a year ago, as Citi set aside money to cover coming losses on late credit cards and other loans."
(See more on Citi's gloomy report here, here and here.)
In explaining its stunning $18.1 billion in write-downs, Citigroup pointed to an uptick in delinquencies across the spectrum, from car loans to mortgages. In other words, more and more consumers have simply stopped paying down their debts.
(The International Herald Tribune surveyed America's culture of debt back in August. Also see the somewhat didactic but ultimately revelatory "Maxed Out," an acclaimed documentary on the subject.)
President Bush is expected to roll out an economic stimulus package in time for his Jan. 28 State of the Union address, but some fear his proposals will be overly cautious. The economy is already topping concerns [PDF] as Americans begin voting for their next president.
The top three Democratic contenders have drawn up stimulus packages of their own. Expect to hear about their proposals at tonight's MSNBC debate in Nevada. We'll be liveblogging starting at 8:45 p.m. EST.
Posted at 12:16 PM
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Bush Administration, Campaigns, Democrats, Economy, President Bush, WH 2008
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