Retail Sales Slow, Raising Concerns About Economy
By John Kapetaneas
Morning Money Memo…
Retailers are posting uneven results this year, but economists and investors are not sounding the warning bells just yet. Although retail sales for the third quarter have gotten off to a slow start, with July's retail numbers falling below expectations, the outlook for the rest of the year is improving, albeit slightly. The disappointing results have ignited debate over the pace of economic growth, and the consumer spending.
"What we've seen so far in the third quarter has been a little underwhelming," says Paul Ballew, chief economist for Dun & Bradstreet. "It's an ongoing challenge to deal with this two steps forward, one and a half steps back from a recovery standpoint."
From an economic standpoint, the current quarter has not been altogether different from the slow and uneven recovery of the previous four years. "Were expecting things to improve marginally as we head into 2015," Ballew adds. "Labor markets are starting to improve, were getting patterns of slightly stronger growth in the U.S., but the operative word is marginally."
Meanwhile, retail giant Wal-Mart met analyst's earnings estimates, posting earnings per share of $1.21 and revenue of $120 billion. However, the world's largest retailer also lowered its full-year earnings outlook, as traffic to Wal-Mart stores fell slightly and comparable store sales remained stagnant. "If you're Wal-Mart you're at least temporarily seeing benefits from a strategy that constituted going back to your everyday discounting," Ballew says. "…but it's still a tough, tough environment in so many ways."
Global markets were mixed this morning, with European markets largely trading in the green. US stocks opened slightly higher going in to Thursday's trading day. Gold rose $3.50 to $1,318 per ounce, although global gold demand had dropped 16 percent in the second quarter. Jobless claims in the U.S. increased by 21,000 last week, the highest level in six weeks.
Networking equipment giant Cisco says it will cut 6,000 jobs, or 8 percent of its workforce, as part of a major restructuring plan. The company posted revenue of $12.36 billion in its latest quarter, down from $12.42 billion last year, as it faces increased competition from young and upcoming tech companies. In a statement, the company maintained its optimism about the road ahead. "We are executing well in a tough environment," CEO John Chambers wrote. "I'm pleased with how we are transforming our company over the past several years, and that journey continues."