http://www.npr.org/templates/story/story.php?storyId=172571064
This article proposes a very interesting idea, and one that is very relevant to what we've been discussing in class. Essentially, this article argues that WalMart, which is a primary supplier of household goods to the middle class, can be used to gauge the economy. It states that the grocery cart of the average WalMart shopper is the grocery cart of the average American, much like the concept of CPI.
In 2011, real income fell by 1.5 percent compared to 2010. WaMart's profits reflected this trend. The idea that a corporation tailored to the middle class can be used to gauge the economic well-being of the middle class is very interesting.
WalMart is coming off of a very successful holiday season, but the projections for this upcoming year look bleak. Will this mean further trouble for the middle class? We can only hope not.
I think this is interesting too! Similar to many economic indicators, there are risks/limits to its accuracy. For example, if WalMart experienced a huge scandal, this could negatively affect sales/increase other expenses - the revenue measure that this model uses would go down, and thus it wouldn't reflect the economy's wellbeing.
ReplyDeleteI think the connection between Wal-mart's profits and the economic well-being is pretty expected. Considering that these families are the main customers at Wal-mart it would make sense that a decline in their income would lead to less spending, so wal-mart's profits would decrease. Also, since the middle class is such a big part of the American economy and it is growing, there is no surprise that a decline in income affects such popular stores that are known nationwide. The article points out that there have not been as many tax refunds distributed as last year so the decline in expected profits may not be permanent.
ReplyDeleteI am actually a little surprised that they go hand and hand. I originally expected that as the economy gets worse (maybe looking at unemployment rate or real wages) Wal Mart may have done a little bit better because more shoppers would go there to take advantage of Wal Mart's low prices. Just a thought but an interesting topic for sure.
ReplyDeleteI agree with Sean, Walmart might be used to gauge the economy but in some cases it might be misleading. With rising prices, middle-class families have reasons to consume less which leads to a decrease in Walmart's profits. However, more well-off families who would not normally shop at Walmart might do so as prices increase. Therefore, Walmart might not be the best indicator of the well-being of middle-class families.
ReplyDelete