Like any strung out addict, US retailers need more and more drug to get the same high.
Aggressive discounts after a slow start to the holiday shopping season helped most US retailers reach sales that were slightly above conservative expectations.Sales are rising, but thanks to discounting more than anything else. The malady of US auto makers is spreading. And are these figures adjusted for inflation?
Last-minute shoppers and gift-card redemptions after Christmas also helped US retailers post solid sales gains in December.
However, promotions may have hurt profits at some retailers. Discount retailer Target said US same-store sales - sales at stores open longer than a year - rose 5.1 per cent in December but warned that fourth quarter profits would fall short of expectations because increased store discounts cut into profits.
Ken Perkins, analyst with retail research firm RetailMetrics, said: "By all accounts this was a more promotional holiday season than in December 2003. And of course there is a direct correlation between promotion and margins."
At the end of the day capital wants profits, not sales. With no pricing leverage, however, increased sales is about all capital can hope for. Rising sales at lower prices means a hell of a lot of throughput if the high profit margins that Wall Street demands are going to be realized. And you know what that means. More imports, higher trade deficits, and a global imbalance that is nowhere close to beginning a steady correction.