#MorePredictionsOnTheEconomy

Target has way too much stuff...
Staring down a huge inventory glut, Target said it’s going to begin offering discounts, canceling orders, and taking other aggressive measures so that its stores don’t end up looking like your grandma’s attic. It also warned that its profits would take a hit while it Marie Kondos its way out of this mess.

Target and other large US retailers are being forced to pivot hard to meet the changing needs of consumers. Whereas during the first two years of the pandemic shoppers were loading up on big-ticket home goods, like furniture and appliances, now they’re spending like it’s 2019—purchasing items such as luggage and cosmetics that are more associated with the “experience economy.”

Retailers were not prepared
Target, Gap, Walmart, and others that had scrambled to stock their shelves early in the pandemic are now sitting on 45 billion in inventory they need to move, up 26% from the same period last year. Walmart’s 32% jump in inventory in Q1 was “higher than we want,” CEO Doug McMillon admitted last month.

What happened: In trying to solve one problem (Covid-related shortages), retailers created another (a surplus of the kinds of goods people don’t want to buy right now). In other words, they have too much grapefruit.

But what about inflation?
Surely soaring prices are discouraging people from shopping and contributing to retailers’ inability to move product, right? Well, that’s the big question economists are trying to answer right now, because it could signal whether we’re entering a recession or not. Consumer spending accounts for nearly 70% of the US economy, after all.

Retailers say that while shoppers are increasingly opting for essential items like groceries over TVs, they’re still spending. And the data supports the theory that the American shopper is holding up just fine…for now: US consumer spending grew at the fastest clip in three months in April, when adjusting for inflation.

This article was written by Morning Brew Online Edition, June 8, 2022.