Channel: DailyFinance.com
Viewing all articles
Browse latest Browse all 9760

American Consumers Are Spending More - But Carefully


Filed under:

Three girls shopping
Ilya Terentyev/Getty Images
American consumers are back!

That's the upshot of the latest report on growth in gross domestic product, or GDP, released by the Bureau of Economic Analysis on July 30. Reporting that the U.S. economy expanded at an annualized rate of 4 percent in the second quarter of 2014, the federal government report shows that even after a lackluster, snow-covered first quarter, the economy has made up its losses -- and then some.

"Personal consumption expenditures" -- spending by the American consumer, who we've often been told accounts for 70 percent of the country's economy -- helped to pull the economy out of its slump in the second quarter. (So give yourself a pat on the back). And yet, the 2.5 percentage points of consumer spending growth reported by the bureau still pales in comparison to the growth exhibited in such categories as "real nonresidential fixed investment" (up 5.5 percent), and "real exports of goods and services" (up 9.5 percent).

So what's up with that?

You Better Shop Around

A recent Gallup poll gives us a few clues. It turns out the American consumers who are spending again are doing so very carefully. Check out these results on how American shoppers, polled by Gallup, say they spent their hard-earned cash from mid-May to mid-June:
  • 83 percent of shoppers polled said they purchased generic of store-brand (private label) goods.
  • 61 percent say they "shopped around," visiting different stores to buy different items, depending on who had the best sale.
  • 59 percent used the Internet to research where such deals could be found.
  • 58 percent used coupons.
  • 40 percent bought "it's new to me" goods -- aka used items.
Waste Not, Want Not

Meanwhile, Gallup noted several trends suggesting that American shoppers are keeping tight leash on discretionary purchases:
  • 55 percent said they held themselves to a "strict budget" when going out shopping.
  • 52 percent agreed with the statement "I only shop for exactly what I need."
  • 75 percent labeled themselves "careful about how I spend my money."
In contrast:
  • 27 percent said that they laid out more than a week's pay on any single purchase during those four weeks.
  • 31 percent reported that they indulged in "shop therapy," aka shopping for fun.
  • 38 percent admitted to making an "impulse purchase."
The Gallup data gives a pretty clear impression that Americans are still feeling pretty miserly about their money. Perversely, that could turn into a problem over time.

After all, it's sometimes noted that what can be good for individuals (saving money, shopping for bargains and spending below your means) can be bad for the economy at large. If everyone in America suddenly starts shopping smart, saving savvily and generally pinching pennies till they scream, then who's going to be left to do all the extra spending necessary to keep the economy growing?

If we want 4 percent GDP growth to become the new norm in America, chances are, more shoppers will need to loosen their death-grips on their wallets first.

Motley Fool contributor Rich Smith is embarrassed to admit that he's probably "part of the problem" of shoppers not spending freely enough.


Permalink | Email this | Linking Blogs | Comments

Viewing all articles
Browse latest Browse all 9760