Americans Spend Less for the First Time in 25 Years
Although the recession began several years ago, the nation’s collective financial problems did not seem to affect Americans’ everyday consumer spending, which continued to increase annually throughout the first years of the recession. However, that changed last year, according to the Consumer Expenditure Survey recently released by the U.S. Bureau of Labor Statistics. In 2009, average annual expenditures per consumer fell 2.8 percent, marking the first drop in spending from the previous year since the survey began publishing data in 1984.
Recently released Gallup survey results echo Labor Statistics data, reporting that lower and middle income Americans’ self-reported average daily spending dropped to $48 per day in September 2010. This is the lowest level since January 2008.
According to the Bureau, spending on food fell 1.1 percent, apparel fell 4.2 percent, and entertainment fell 5 percent. Medical spending rose 5 percent, but other necessities such as housing and transportation fell, by 1.3 percent and 11 percent respectively.
Personal expenditures are down more than income has decreased, experts say, which means that people are saving more even when they don’t necessarily need to. This may mean that Americans have changed the way they think about “the necessities of life”, according to Robert Nielsen, assistant professor of consumer economics at The University of Georgia, and that these new spending habits may continue long after the recession ends.
“I think there’s been a large shift in people’s attitudes and behaviors,” said Simon Medcalfe, assistant professor of finance at Augusta State University. “If you think this recession was the worst since the Great Depression, and you speak to people that went through that period, they were very thrifty coming out of that, and remained thrifty for the rest of their lives.”
Nielsen says the survey may also indicate a decrease in consumer confidence. “If consumers are actually cutting back rather than just seeing a reduction in prices, then that just gives further evidence for all the pretty negative consumer confidence numbers that we’re seeing,” he said. “In general, most of us are less optimistic than even a year ago.”
Source: The Augusta Chronicle, “Consumers still cutting back on spending“, LaTina Emerson, 16 October 2010