Consumers are “straining against rising prices on daily essentials to afford summer travel, dining out, and discretionary household purchases – the kinds of purchases that ordinarily keep an economy humming.” That’s what Gallup found when it used a new survey to dive deeper into consumer spending.
Its regular monthly survey has been mixed. The average dollar amount consumers spent in June swooned to $91 per day from $98 in May, after a crummy January-April period ranging from $78 to $88 per day. The May spurt seems to have been an outlier that had given rise to a lot of speculation consumers would finally hit “escape velocity,” now obviated by events. But from 2012 until late last year, the averages had been rising.
So Gallup dove deeper into the issue with its new survey conducted in mid-June to sort through what consumers are spending more or less money on. And what it found was that they’re buying a little more – “just not the things they want.”
They’re spending more on things they have to buy, and in many instances they’re spending more in these categories because prices have jumped. At the top of the list: groceries.
- Groceries: 59% spent more, 10% spent less.
- Gasoline: 58% spent more, 12% spent less
- Utilities: 45% spent more, 10% spent less
- Healthcare: 42% spent, 8% spent less
- Toilet paper and other household goods: 32% spent more, 5% spent less
- Rent, the biggie: 32% spent more, 9% spent less.
These categories are household essentials. They’re on top of the priority list. And in order to meet the requirements of these items, consumers are cutting back where they can. Gallup found that “the increasing cost of essential items is further constraining family budgets already hit hard by the Great Recession and still reeling from a stagnant economy.” Hence, the less essential the expense, the more it got cut. Here is the bottom of the list, which explains part of the recent retail woes:
- Retirement savings: 18% spent more, 17% spent less.
- Leisure activities: 28% spent more, 31% spent less
- Clothing: 25% spent more, 30% spent less
- Consumer electronics: 20% spent more, 31% spent less
- Travel: 26% spent more, 38% spent less
- Dining out: 26% spent more, 38% spent less
Then there are summer travel plans, so future spending. They show just how bifurcated the economy has become. On the positive side of the ledger, 69% of American plan to travel this summer, the highest since 2006, and far more than the 52% in 2009 during the depth of the Great Recession. And those travelers intend to spend more on transportation, food, lodging, and entertainment than last year, as Gallup put it, “further pressuring their already-strained budgets.”
But about one-third plan to spend only one night or less away from home. So not exactly a long vacation. And 36% are planning to travel less than last year, even worse than in the terrible year of 2010, when 33% were cutting back from the already terrible year 2009.
And what about “escape velocity” in consumer spending? Despite what Wall Street economists and other hype mongers have been predicting for five years in a row, Gallop soberly slams the lid on those speculations:
If there was any doubt that the U.S. economy is still struggling to get back on its feet, the results of this poll reinforce that reality. Because consumer spending is the lifeblood of a healthy economy, these findings suggest that discretionary spending still has a ways to go before it will fuel the kind of economic growth Americans have been hoping for.
Americans who are struggling to make ends meet, and who cut discretionary spending in order to pay for essentials, form a large part of the middle class. But there are others who don’t have these problems, who are doing well. A dichotomy that shows up in “dining out.”
“Dining out” made the bottom of the list: 38% of the people cut back, while only 26% spent more on it. The restaurant industry should be groaning in pain.
But someone must be eating out. The Restaurant Performance Index (RPI) for May, released on June 30, rose again, “driven by stronger sales and traffic levels and an increasingly optimistic outlook among restaurant operators.” May was the third month in a row that the Current Situation Index was above 100, and therefore in expansion mode.
Smell of conundrum? Nope. But a sign of America’s dual-track society. The 26% of consumer who spent more on dining out might well belong to that group whose median household income exceeds $50k a year. They feel flush and their confidence has soared to post-recession highs. But the confidence of consumers making less than $50k a year has barely moved up from the recession bottom. And the gap between the two is at a record high. Read…. This Chart Truly Depicts What’s Wrong With the ‘Recovery’ in America
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Using stats to interpret the economy seems to be increasing in complexity due to multiplicity of factors. Many lower household incomes are in better shape than households with higher incomes because the lower income qualifies for diverse forms of government assistance. Therefore a $30k household may actually fare better than a $60k one.
As the essentials eat up disposable income, they crowd out traditional smaller businesses like florists, clothing stores, jewellers, pet groomers, musicians, and a world of providers whose product can be done without “for now.”
Of course, that puts their employees out of work, and the economy into a separation spiral where there are two sorts of businesses — essentials, and the very cheapest of non essentials, from thrift shops, dollar stores. In such an environment, unlicensed workers are scrambling for a few extra bucks doing shoddy pet grooming, home repairs, housecleaning, and so on — jobs that kids used to try to do — thus edging out professionals in those fields and putting MORE people out of work.
It’s a world of mastodons eating all the big stuff and mice living on the remaining crumbs, with nothing much in between. Maybe it’s a stable form of economy, but it’s not a pretty one.
The Western world appears to be moving back to what my life was like back in England in the 1950s.
Very few had cars; everyone rode bicycles.
Food rationing didn’t end until Sept 1956 (the last thing rationed was meat).
Everyone had a large backyard vegetable patch, so veggies were quite cheap and healthy, You filled the kids up with lots of potatoes.
Generally speaking most people were very healthy, very few were overweight.
Interestingly, after the war, the government was interested in the general health of the population compared to 1938-39. Doctors reported that many people they saw had lost some weight but they were generally healthy. People in the East-End of London, where some of the worst slums in Britain were, were noticeably healthier.
Remember, sugar was rationed, tobacco was quite hard to get and hard liquor was rare and very expensive. Adults were allowed about 4 oz of meat a week, the actual amount depended on the cut of meat and the quality.
The habit of putting in a large veggie patch kept going for many years after the war, but I’m sorry to say that as the older people who remember die off, the habits are being lost. The knowledge required to efficiently garden is going the same way as the knowledge of home/healthy cooking that was passed down from mother to daughter.
It would be a good idea, for those wanting to get started, to look around your neighbourhood, find some older person with a veggie patch and ask him/her for advice. You’ll find that the vast majority of gardeners are happy to help you.
The Public Be Suckered
If I don’t need it I don’t buy it. That is the new normal.
A big thank you for your article.Thanks Again. Great. eefddcedbbdd