Consumer fear over economy stalls sales

Walmart CEO Mike Duke
Xavier Walter paid off all of his $20,000 in credit card debt. He's got a strict, cash-only policy now as America's credit card habit is changing.
CBS News

Wal-Mart stores account for more than 11 percent of this country's retail sales. But CEO Mike Duke said his customers are stretched, struggling and worried about jobs.

It showed in Wal-Mart's second-quarter sales -- down nine-tenths of one percent -- their ninth-straight quarterly drop.

Add to that another report out that says sales at U.S. chain stores overall fell one-and a-half percent last week -- the third-straight weekly decline. CBS News correspondent Jim Axelrod reports on how a cutback in consumer spending is threatening the recovery.

From televisions to townhouses, consumer fear of the future is stalling sales.

"The pace of sales was slower than we ordinarily would like to see them," said New Jersey developer Russ Lupino.

Luppino could've broken ground on this $12 million housing project more than a year ago. But he decided to wait.

"If the market sales were better, the rate of the sales,we would have started already," he said.

He just turned down financing on another project across town for the same reason. His banker, Frank Sorrentino, said this lack of consumer confidence is what is contaminating the recovery.

"When you look at the hysteria in the marketplace, people are second-guessing the decisions that they would ordinarily make in a different fashion."

Look no further than America's changing credit card habits as proof. Credit card delinquencies are at their lowest level in 17 years as consumers use cash -- not for new purchases -- but to pay down old debt.

Outside Philadelphia, Xavier Walter paid off all of his $20,000 in credit card debt. He's got a strict, cash-only policy now.

"It's a weekly budget now, it's a daily budget," Walter said. "It's a minute-by-minute budget, so I'm constantly making decisions in my head - 'Is this something I absolutely need right now?'"

Sorrentino added: "For every person who doesn't put on debt, they are not buying that flat screen TV. They are not going on that extra vacation and they are not going out to dinner. I'm not saying they should, but all those businesses now get affected."

"That's why a recovery stalls?" asked Axelrod.

"That's why were in, what I think is, the 3rd or 4th inning of a recovery," said Sorrentino. "We have a long way to go here."

Top economists polled in two recent surveys set the odds for a new recession at roughly 1 in 3. A month ago, it was just 1 in 5.

  • Jim Axelrod
    Jim Axelrod

    Jim Axelrod is the senior national correspondent for CBS News, reporting for "CBS This Morning," the "CBS Evening News," "CBS Sunday Morning," and other CBS News broadcasts.