And the Latte Indicator Says...Economy Screwed

How bad is the economy these days? So bad that one of the nation's largest purveyors of custom-made addictive drugs is slashing its forecast yet again as customers tighten their belts.

In the salad days, of course, many Starbucks fans argued that $5 Mocha Frappucinos and $3 coffees were no longer "consumer discretionary" items (stuff we choose to buy when we're feeling flush) but "consumer staples" (stuff we have to buy in thick or thin). Alas, now that the economy is tanking and gas prices are soaring, many consumers are wisely choosing to pump the $4 into their gas tanks instead of their stomachs.

On the back of a recent stock-market rally, you hear rumors that the Fed's emergency injection of cash into the crashing financial system has saved the day--paving the way for an economic recovery in the second half of the year. Don't bet on it. Wall Street may have staved off a Bear Stearns-like fate, but Main Street, which accounts for 70% of spending in our economy, is just beginning to feel the pain.

Comments

[dadw5boys]

Why would anyone pay $ 55.00 a gallon for flavored coffee?

[dadw5boys]

Who pays $5.00 for a cup of water, flavored sugar and a little coffee ???

[quickfix]

I had posted earlier that I thought that the 2 ways to fix the economy was to keep the jobs in the U.S. and to stop "illegal" immigrants from coming over and not paying taxes and I was amazed that some people opposed the idea.First of all if jobs leave America leaving people with families out of work and having to settle for a minimum wage job that was 1/2 of what they where making or less the economy will never recover.  So my suggestion was that the Feds place heavy fines on companies that decide to move overseas so that it will cost them more money than they save.The second was to stop immigrants from coming over illegally and not paying taxes.  Someone disagreed with that stating that immigrants do pay taxes, but I think they missed the key word "illegal".  We all know there are millions of them working jobs all over America for cash and never paying a dime of taxes.  In my job I see this everyday driving on this great countries roads without a license and picking up charges.  We have to pay to prosecute and house them which leads to elevated taxes and gas, food, and everything else soon follows.  So I believe that until these 2 problems are solved a small stimulus check will serve as no long term solution.

[dadw5boys]

HEY, BUSH JUST GOT TAX INCENTIVES TO HELP BUSINESSES MOVE AMERICAN JOBS OVERSEAS!

NEIL BUSH MAKES A FORTUNE TAKING AMERICAN BUSINESSMEN OVERSEAS TO FIND A PLACE FOR THEM TO MOVE TO.

YOU DON'T WANT TO HURT THE BUSH FAMILYS MILTI-MILLION DOLLAR OPERATION NOW DO YOU?

ASK MC CAIN HE VOTED FOR THE TAX INCENTIVES IN 2004 AND 2005!

[aceholiday]

legalize them. tax them. end of story.

[swift_goat_pet_for_truth]

What to stop illegal aliens coming to the US?

10 years hard time for the people who hire them, including the top management of companies like Wal-Mart and all construction companies.
Some families hire illegals to watch their kids? 10 years hard time, no parole.
Some guy hires illegals to mow his lawn? 10 years, maximum security prison with murderers and rapists, no parole.

That will stop the hiring. Illegals will not come over for jobs.

[swift_goat_pet_for_truth]

The American economy will not regain its former strength until the middle American worker regains access to the levels of disposable income they once had.¨¨Our post-WWII economy was built on the disposable income of middle Americans who used it to buy cars, them new fangled TVs, refrigerators, stoves, toys, etc.

After REAGAN gutted the unions and shifted the tax structure to strangle middle class Americans and benefit the rich (who soon became the uber-rich), the American worker's disposable income slowly decreased, but the spending was buoyed by financial events like the tech boom (and bubble) and the housing boom (and bubble), facilitated by easy credit.¨¨

Well, that is not happening now. And corporations have squeezed their workers to fatten their bottom lines (and CEO paychecks) about all they can. What is really needed for American corporations to grow is top line growth - SALES. And sales ain't happening if the middle class is spending all their money on food, gas, their health care, and paying off credit card debt.¨¨

The growth of the middle class was signaled last century by businessmen like Henry Ford paying their workers way more than the going price so that they could afford Mr. Ford's new cars. Until that happens, I do not see American businesses, or Americans, doing particularly well.

[americaforme]

I am resolved not to panic...The dollar will come back big,from its roll in rice and flour...We are the bread basket for the world...Americans are a hardy lot, we can give up junk and stuff...Reality is the world has been sucking us dry, from our buying (junk and Stuff). The field day is over, and guess what we can live without junk and stuff. Too bad, the outsourcing wont work any more the rich wont get richer, America has turned off her appetite. It will be a long, long time before we recover from this mess. I am learning how to cook again and its fun... We accept the challange, we're in for the long hall. Cutting back and enjoying it. God Bless America.

[MilwaukeeDan]

Mr. Bloget, the latte indicator may not be that scientific, but all you have to do is read the news or play consumer. Things aren't that good out there, as for the second half recovery, what tea leaves are these guys reading(or smoking)? Trillions of dollars of home equity has evaporated, food/fuel prices rise daily, occupations that cost billions, boomers starting to retire and stagnant wages for the middle class(if it's still there). Yeah, thing are so bright, I gotta wear shades.

[Crowhaul]

It's not so much that we Americans no longer have the discretionary income to dole out for a $5.00 frappa-whatever..... it's more that we refuse to be further cajoled into uttering the word 'venti'. Nothing is worth that price.

Starbucks should have known better. It really IS that simple.

[JoeBlough]

A cupa joe should never cost more than a gallon of gas. Just not rational.

[dadw5boys]

At that price $5 Mocha Frappucinos is about $55.00 a gallon!!!!!!!!!!!

[dadw5boys]

According to the law imported coffee is not suppose to be taxed but it is!!

We do not grow coffee here as a crop so there is reason for a tax to import but it is a big money maker for the government.

[DXM]

I have a couple of other "economic indicators" that things are not going well with the economy albeit not very scientific and based on my non-quatitative impressions. First, I like to occasionally "treat" myself to a Big Mac or something equally sinful. In years past when I did such things regularly, the restaurant was always packed come noontime and the lines were long. Just last week I did it and there was no line and many of the tables were empty. In another example, I went to a local mall around lunch time to look for a gift as well as pick up a quick bite to eat at the mall's food court. Again, usually the parking lot is packed (especially near the food court entrance) around lunch time and I have to park my car in one of the outer lots and walk some distance. Not this time - the parking lots were quite empty and the mall was noticably too quiet. Like I said, these anecdotal observations are not very scientific but it sure seems to me that retail business around here has slowed down a lot in a normally busy business area.