In the 1950s it used to be that what was good for General Motors, was good for America.

These days GM is a government-owned and a recovering bankrupt; the 2009 equivalent is Wal-Mart, but with a twist.

It’s more like, how Wal-Mart’s sales grow, so grows the US economy and the vital consumer, who accounts for upwards of two thirds of all American economic activity.

In the past two quarter’s its been a miserable story from the retailer: some store sales have sunk, as overall retail sales have drifted lower.

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American consumer spending has been weak, consumer credit has been falling: the cash for clunkers boost did nothing for retailers, except deprive them of possible sales as consumers bought cars instead of shopping at Wal-Mart

The retailer is now the most accurate barometer of US economic health and judging by the reading in the company’s latest quarter’s report America is a sad way. Some 200 million Americans a week shop at Wal-Mart (and it is not in the huge New York market, and several other major cities) so when they stop spending as much as they did, it’s a sign the wider economy is suffering, despite all the talk of a “recovery”.

The retailer’s net sales in the period were $98.7 billion, up 1.1% from a year ago, but same-store sales fell 0.4% in the quarter. Profits were up in the quarter on forecasts because it cut its stocks of unsold goods and increased so-called stock turn; the time it takes to push an item through its sales chain and out the door.

It was the second consecutive quarter that Wal-Mart has reported a fall in same-store sales, while claiming it is stealing market share away from its competitors. If that is happening, the competition must be hurting.

The weak same-store sales, combined with an equally weak same-store sales guidance for the fourth, saw US shares sold off as investors realised that Wal-Mart’s commentary was closer to the current reality of the American economy, than the forecasts and estimates of Wall Street analysts and economists.

It was the second time in three days that America got an economic reality check from an impeccable source.

Two days earlier it was a clutch of Federal Reserve board members telling Americans the grim, “suboptimal” reality of the emerging recovery.

Wal-Mart’s outlook for the current quarter was more important because it includes the most important four weeks of the year for the economy as a whole.

The four weeks from the day after Thanksgiving onwards is the biggest selling period for US retailing. This year its Friday November 27, which will be known as “Black Friday” the day when US retailers’ profits for the year are made (some stores make 60% of their year’s sales and all their profits in the four weeks up to Christmas Eve).

This year, Wal-Mart is also cutting prices daily in its thousands of US stores and online at especially books and toys and some food items (televisions to turkeys, was the banner on one recent price cut release), as tries to keep cash-strapped Americans coming in the doors.

Wal-Mart executives said in a post results phone conference that its sales this quarter (which ends January 31) would be flat to slightly lower (1%, plus or minus) on a same store basis, compared to a 2.4% rise in the same quarter of 2008-09.

With inflation negligible (in fact deflation in some sectors), the retail giant could be looking at sales falling 2%-3% on a same store basis on a yearly comparison

The company said the reason for the slide this year was “The economy”: “Money and finances continues to be the No.1 concern among our customer, No.2 would be cost of living and No.3 would be jobs,” was the mantra from executives.

“Customers continue to tell us they’re concerned about their own finances and unemployment,” Wal-Mart US chief Eduardo Castro-Wright said on a pre-recorded call. “We recognise that some customers may be more cautious in their holiday spending.”

Wal-Mart treasurer Charles Holley told reporters that consumers would need to see a sustainable drop in the unemployment rate before they would feel more optimistic.

And to give the anemic US performance some context, Wal-Mart reported a 9% rise in quarterly underlying profit at its international businesses, outperforming the US with strong growth in Britain (which is still in recession), Mexico (hit hard like the US) and Brazil (growing strongly).

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