Spending is up a tad from depressed 2009 levels but still way below 2008 levels. Looking ahead year-over-year comparisons will be much more difficult and weak sales will continue to impact state budgets.
A recent Gallup Poll shows U.S. Consumers Pulling Back on Spending in August
Americans’ self-reported spending in stores, restaurants, gas stations, and online averaged $61 per day during the week ending Aug. 29. So far, August and back-to-school 2010 spending trends appear no better than those of August 2009.
Self-Reported Spending Suggests “New Normal” Continues
Gallup’s consumer spending measure averaged $68 per day in July and $67 in June — up $6 on average from prior-year comparables, and at the upper end of the 2009 “new normal” monthly spending range of $59 to $67. The July results seem consistent with Monday’s report of a 0.4% increase in personal spending in July 2010.
At this point, consumer spending in August is running below that of June and July, falling back to roughly the $65-per-day average of August 2009. This is consistent with perceptions of a continued weakening of the U.S. economy and tepid back-to-school sales.
Economic Consumer Confidence Drops Below Depressed 2009 Levels
In spite of other survey that show a slight uptick in consumer confidence (with emphasis on slight) a Gallup Poll shows U.S. Economic Confidence Down in Recent Weeks
After improving slightly earlier this month, Gallup’s Economic Confidence Index declined over the past two weeks to its current -33, matching the average for all of July.
“Poor” Ratings of Economy Are Near 2010 High
Forty-eight percent of Americans rated current economic conditions as “poor” during the week ending Aug. 22 — approaching the highest levels of the year. This is marginally worse than the early August reading, is in line with the full July average of 47%, and is marginally worse than at this time in 2009.
During recent weeks, slightly more consumers told Gallup they think economic conditions are “getting worse” than thought that was the case earlier this month. These expectations for the economy basically match the average for all of July and are worse than those consumers held at this time a year ago.
What Consumers Say
- 48% of consumers say that current economic conditions are “poor”
- 62% of consumers say economic conditions are “getting worse”
What consumers say and what they do may be two different things. However, in this case, actual sales data from Mastercard Advisers seems to confirm this lack of confidence.
Back-to-School Sales Bust
Please consider Back-to-School Shopping Bust Heralds Holiday Woes
In an ominous sign for the holiday shopping season, American consumers behaved like skinflints in August, focusing on bare necessities and budget-priced deals as they made back-to-school purchases.
Shoppers spent slightly more last month than they had the year before, according to MasterCard Advisors, which crunches data from credit cards, checks and cash payments to form sales estimates. But in nearly every category, the sales numbers were far short of 2008 levels, indicating the economic recovery remains sluggish.
Indeed, an index of consumer confidence released Tuesday by the Conference Board, a private research group, rose just 2.5 points in August, to 53.5.
And a Gallup Poll of consumers’ self-reported spending in August showed that consumers estimated they spent $65 a day, less than in June and July and roughly the same as in August 2009. The estimates, released Tuesday, included restaurant and gasoline purchases as well as items like clothing.
Total clothing sales rose 2.6% in August from a year earlier, MasterCard said, but they were buoyed by an 8.4% jump in children’s wear. Sales of men’s clothing fell 1.9% and women’s clothing fell 2.7%, suggesting that parents were forgoing purchases for themselves. Clothes sales were still off 2.3% compared with two years ago.
The story was similar in electronics, where sales rose a modest 2.3% from the year before but were down 9.9% from two years ago.
Luxury retailing saw a 1% sales drop in August and remained 13.8% below the same month in 2008, according to the MasterCard figures, which are set to be released Wednesday.
The back-to-school shopping season is second in importance only to the holidays for American retailers and often serves as a harbinger. If so, retail experts predict increased price competition this Christmas.
I see no reason for consumer spending or consumer confidence to rise in a meaningful way, anytime soon.
Moreover, those Gallup economic confidence numbers, as they sit now, are indicative of a Democratic blowup in the Autumn elections. Thus, I expect Republicans will win the house and pickup seats in the Senate in the November midterm elections.
Finally, those weak sales numbers, even if they stabilize will continue to pressure states in desperate need to get tax revenue back up to 2007 levels. It’s not going to happen and states will be forced into additional huge cutbacks in public union wages, employment, pension benefits, or all three.
Mike “Mish” Shedlock
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