Friday, November 15, 2019

Main Street Deplorables Driving Strong U.S. Sales for WalMart – Inflation Remains Low (1.8%)


A very strong jobs market, and wage growth for the middle-class at the highest rate in decades, continues to benefit Main Street USA.  As noted within the sales and earnings report from Walmart today, the U.S. middle-class continues to thrive in a MAGA-driven U.S. economy.
(Reuters) […] Consumer spending going in to the crucial holiday season remains healthy, Chief Financial Officer Brett Biggs told Reuters in an interview on Thursday. Retailers earn a sizeable chunk of their annual revenue during November and December.
“The consumer remains in pretty good shape, employment situation is good, fuel prices are low … wage growth is pretty good,” he said. (more)
It is easy to forget how two-years-ago the doomsayers and financial pundits were claiming President Trump’s tariff policies were going to create massive price increases.  They were completely wrong in their predictions.  The latest U.S. inflation reports show low inflation at 1.8 percent year-over-year.

Average wage growth is in the 3.5 percent range across all workers; however, the wage growth at the lower end of the scale is a stunning 9 percent for non-supervisory employees.  This is a direct outcome of internal U.S. economic growth that benefits Main Street.

Wage growth is created by job market pressure for workers.  The middle-class is gaining wealth, consumers feel secure in making purchases and spending on goods and services is strong.  The consequence of a strong middle class is increased demand for goods and services; that creates increased job demand and upward wage pressure amid lower-skilled industries and sectors.  All boats rise with an increasing economic tide.

The strongest financial benefits are centered around those companies invested heavily inside the domestic U.S. economy.  Main Street U.S.A. companies like Walmart are seeing strong sales.  There is no reason to think this trend will not continue.  In fact, MAGAnomic policies are specifically designed to create positive America-First outcomes.

Meanwhile:




Main Street consumer spending was up $64 billion on goods and $36 billion on services in the 3rd quarter. As those who follow MAGAnomics closely will remember, the Main Street economy is founded upon middle-class spending. Strong jobs, wage growth, low taxes, low inflation, and low energy costs, means more disposable income. Disposable income grew 4.5% in the third quarter.

The U.S. economy is strong because approximately 70% to 80% of everything produced inside our economy is consumed inside our economy. As long as the underlying jobs market stays strong, consumer spending leads to self-fulfilling economic expansion. Main Street is doing very well.

For 30+ years Wall Street has been investing overseas for production of goods; and with that process U.S. jobs were lost. President Trump has positioned the best return on production investment as the U.S. Tariffs on China and the EU bolster that approach.

The key to reignite domestic investment is to pass the USMCA trade agreement which will provide certainty and allow corporate CFO’s to calculate Total Cost of Production (TCP). Once TCP can be calculated within the 5-year and 10-year rolling business plans, manufacturers will be able to determine specifics of U.S. investment; and/or retraction from Asian investment.

Unfortunately, Nancy Pelosi knows USMCA ratification is the key corporate investors are looking for. As a result, and with the intent to keep the Trump economy as favorable as possible for her 2020 ambitions, Pelosi has been stalling the passage of USMCA.

China and the EU continue to struggle as the U.S. economy remains strong. China and the EU devaluing their currency is driving up the value of the dollar, and dropping the import cost of goods. As a result, despite the tariffs, the U.S. continues to import deflation (lower prices of imports). Domestic production is healthy and inventories are turning.


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