All is clearly not well with the Western consumer. The stimulus programmes have not given them renewed confidence about the future. Instead, they are focused on the prospect of higher taxes and rising unemployment.
Two examples make this mood change very clear:
• As the above slide shows, EU auto sales are falling off the charts. They were down 17% (red line) in October, normally a strong month. Equally concerning were the massive declines in the 5 major markets: France down 19%, Germany down 20%, UK down 22%, Italy down 29% and Spain down 38%.
• In the USA, Wal-Mart, the world’s largest retailer, saw its same-store sales fall for a 6th consecutive quarter, down 1.3%. This is unprecedented. In response it is launching what promises to be a bitter price war, declaring that it intends to “be the price leader this holiday season”. Similarly, US housing starts fell to just 519k, back to April 2009 levels, in spite of record low interest rates.
The blog fears that the consensus Base Case Scenario for 2011 is already starting to look quite optimistic. If it was still running a major business, it would be strongly tempted to revisit the Downside Scenario outlined last month in its Budget Outlook, and re-check how this might impact expected performance.