However, outstanding consumer credit in the US contracted another $11.5 billion in February, marking the twelfth decline in 13 months and demonstrating that the household sector is still undertaking balance sheet adjustments. A robust recovery in consumer spending is unlikely as long as credit continues to shrink. Retail leader Wal-Mart announced on 9 April that it would lower the prices on 10,000 of its products in response to a Q1 decline in US store sales, calling into question the oft-heard argument that retail sales are strong. The chain also said it plans to cut more prices in the future. There are two possible causes for the drop in sales at Wal-Mart. One is that incomes have risen, causing consumption to shift from the chain’s inexpensive offerings to higher-end products. The other is that the weak economy has caused a further reduction in consumers’ purchasing power.
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