5.5.13

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


If the Shoe Fits, Don't Wear it; Instead Buy Two, Return One

Posted: 05 May 2013 10:18 PM PDT

Shoe stores are increasingly fed up with customers trying on pair after pair of shoes and not buying any of them.

Worried shopkeepers are increasingly frustrated by people they dub "fit-lifters" who use stores to find the best-fitting shoes before buying them online at a lower price says the Financial Times in Shoe stores sock it to online buyers.
If the shoe fits . . . but you don't buy it, you could soon be tarred with the same brush as shoplifters by shoe store owners.

Bricks-and-mortar shops have higher salary and rental costs than internet rivals and store owners say some online buyers are freeriding on their resources. "You've come in and stolen that service basically," said Richard Napier of Idaho Mountain Trading, an outdoor sports store in Idaho Falls, who calls fit-lifting unethical.

"It's not that the salesperson didn't have somebody else to serve who would have bought something. So not only have you stolen the wages. I have a loss of revenue that he would have collected from another customer."

It is common for online shoppers to research products in stores in other retail sectors such as bookselling – a practice named "showrooming" – and smartphones make it possible to buy online even while still in a store. But the trend is particularly contentious in footwear because staff spend so much time fetching boxes and advising customers on comfort.

Gary Weiner, owner of Saxon Shoes in Virginia and a board member of the National Shoe Retailers Association, said shoe-sellers were "very concerned" about fit-lifting.

"We also hear 'My mother sent me in to get my size fitted so she can buy them online'. Those exact words," he said. "We're a polite people. So we give them the time of day."

Zappos, an online shoe-seller owned by Amazon, encourages shoppers to order two or more different sizes, which they can return for free, in an effort to overcome customer reluctance to buy without trying.
Making Sense of It All

What does it say when it is cheaper to buy two pairs of shoes and return one rather than to buy a pair of shoes at a shoe store?

Three-Part Answer

  1. The price of labor and benefits is too high. 
  2. The price of rent is too high
  3. For consumers, the convenience of having it now is not worth the extra cost

Given the above, raising minimum wages is not the answer. Nor is the Fed policy that attempts to raise asset prices of real estate.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

China Services PMI Slows to Marginal Rate of Growth

Posted: 05 May 2013 09:06 PM PDT

Fresh on the heels of a report that shows China Manufacturing PMI barely Above Contraction comes news the Chinese service sector is following suit.

The Markit China Composite PMI shows Activity growth eases across both the manufacturing and service sectors in April.
Key Points

  • Composite data signals slower activity and new business growth in April
  • Total employment falls for first time since last October
  • Both input prices and output charges decline at the composite level

HSBC China Composite PMI™ data (which covers both manufacturing and services) signalled an expansion of output for the eighth consecutive month in April. However, the HSBC China Composite Output Index signalled only a marginal rate of growth, posting at 51.1. This was down from 53.5 in March, suggesting that the rate of expansion was the weakest since last October.

Behind the weaker expansion of total output was a slower rate of new order growth in April. Both the manufacturing and service sector posted modest rates of expansion that were weaker than in March. Overall, new order growth at the composite level was the slowest in seven months.

Backlogs of work decreased at service providers, but rose at manufacturers in April. That said, the rates of change were marginal in both sectors. At the composite level, backlogs of work declined for the third month in a row, though only slightly. Employment levels decreased across both the manufacturing and service sectors in April.

Although the rates of job shedding were only marginal in both cases, it was nonetheless the first time service providers had cut their staff numbers since January 2009 and was the first reduction in manufacturing payroll numbers since last November. Consequently, employment at the composite level fell slightly in April.
Signs that the global economy has stalled, if not in outright recession (I believe the latter) continue to mount.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Interactive Map of Food Stamp Usage; What Can Be Done to Curtail Usage?

Posted: 05 May 2013 10:23 AM PDT

Food stamp usage, now called SNAP (Supplemental Nutrition Assistance Program) has dramatically risen under the Obama administration, so much so that Newt Gingrich dubbed Obama the "food stamp president". One in 15 now receives assistance. Yet usage varies widely from county to county.

A nice interactive map by Slate addresses the question How Many People Around You Receive Food Stamps?
In some parts of the country, as few as 1 in 20 people receive food stamps. In others, the figure is more than 1 in 3. Low-income households that meet SNAP eligibility requirements receive a payment card that can only be used to buy government-approved essential foods.

Due to the high unemployment rate, the Obama administration has also waived a 1996 job requirement—a rule that made finding a job or enrolling in job training a prerequisite for receiving SNAP benefits—for 46 states. Republican leaders are trying to reinstate the requirement to counteract the program's escalating cost.

Click on the above link to see an interactive map by zipcode or county. I entered a few zipcodes to see the results

  • Vermilion County Illinois - My hometown of Danville, - 21%
  • Cook County Illinois - Chicago - 16%
  • Alexander County Illinois - East St. Louis - 34%
  • Wayne County Michigan - Detroit - 28%
  • Los Angeles County California - 9%
  • Tulare County California - 22%
 
What Can Be Done?

Some Republicans want to reinstate the rule that made finding a job or enrolling in job training a prerequisite for receiving SNAP benefits. That may unduly punsih kids on the program.

I suggest something more beneficial and more healthy as well. Sharply curtail what can be purchased under the program:

  • No soft drinks
  • No snacks
  • No crackers
  • No cakes or cookies 
  • No cake or cookie mixes
  • No frozen foods other than frozen orange juice
  • No candy
  • Limited amount of meat
  • No brand names of anything where store brands are available

For the sake of cleanliness, I would expand the program to allow purchase of generic soaps and cleaners.

The idea is to give people a strong incentive to get off the system, not punish those who cannot, and not punish children whose parents refuse to take the initiative.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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