Weakening global sales undermining growth bulls

As China’s manufacturing contracted for the 4th consecutive month in April, the OECD has lowered its global growth forecasts yet again for 2014, and major investment banks are now slashing their Q1 US GDP growth forecasts into negative numbers. Although creative accounting and share-buybacks on debt (longer-term suicidal) have managed to keep profit growth advancing in the short term, earnings growth is still slowing and sales trends are looking bleaker still.
Neg to positive Q214










Sure there are now about 1645 billionaires in the world (double the number from 2006), but magic accounting aside, companies and economies still do need customers from the other 99.9% of the world, it turns out. Who would have thunk that was necessary?

Meanwhile cash strapped Americans (who are still the wealthiest households in the world don’t forget) are busily redeeming funds from their incredibly meager retirement savings to make ends meet.  See: Early tap of 401(k) replaces homes as American piggy-bank.

The Internal Revenue Service collected $5.7 billion in 2011 from 401(k) early redemption penalties, meaning that Americans took out about $57 billion from retirement funds before retirement.  This is not a sustainable solution though as funds are extremely limited and spending now simply means less spending capacity later:

“The median size of a 401(k) is $24,400 as of March 31, with people older than 55 having $65,300, according to Fidelity Investments. Those funds can disappear quickly in retirement, and the early withdrawals indicate that the coming retirement crisis could be even more acute than expected.”

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