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Cut Back
By Daphne | January 14, 2008
The New York Times featured an article today titled “Americans Cut Back Sharply on Spending.”
This should not be a surprise to anyone.
The most interesting part of the article was:
“‘This is the real deal, consumers are slowing down across the spectrum,’ said David Schick, a retail analyst at Stifel Nicolaus.”
People who make more money the upper middle class, those with more earning power are feeling the pinch.
Stores are offering coupons, sales and other goodies to entice people to spend but with financial uncertainty people are cutting back. The majority of our economy is dependent on consumers. If we are spending less then it affects a great deal of the world because many countries that have emergent economies are deeply entrenched to our spending habits. Even non emergent countries are deeply tied to our spending habits.
Debt has also been a driving factor in the economic growth. I was watching a national news program this morning and one way to recession proof yourself was to get a HELOC (home equity line of credit). I could not believe it. Getting this line of credit does not mean that you have to use it but so many people already did get HELOCs that it has put them in deeper debt and they owe more than their properties are worth. It isn’t fair but it happens.
When higher end stores start feeling the pinch then you really know that the economy is struggling because supposedly those with more earning power are supposedly immune. Obviously not if Nordstrom, Macy’s and Coach were having difficulty getting customers.
A consumer pullback does not mean that we are entering a recession. I think people are finally realizing that everyone needs to be more fiscally responsible and purchases do not equal happiness. Besides everything that you purchase needs to be paid for. Credit card debt also has a part to play in this. If consumers want to get themselves on a better footing and realize that credit will not be so easy to come by as in the past they pull back.
As of November, according to the Federal Reserve, American consumers owe $943 billion dollars in consumer debt. That is credit card debt. That is a lot. Of course some of that total includes people who pay off their bills on time or before incurring interest or a penalty.
This year may be when people seriously decide to pay down debt and pare down their spending. This does not mean that people were headed to financial ruin, it means that actually making changes in an uncertain economy is a wise decision. It is a bandwagon that many have jumped on to the dismay of the retailers.
Personally, I have been trying to purge my home of extra items that I do not need. This does not mean that I do not buy things I just put more thought into purchases before I make them.
Topics: January 2008 |