Consumer spending: The party’s over

last updated 8 January 2015

Dali Wiederhoft, a marketing executive from Reno, Nev., has given up buying designer shoes, fired her cleaning woman and her gardener, and plans to trade in her BMW for a Ford. Elena Gamble, a prison grievance counselor in Elk City, Okla., no longer goes to the movies and suspended her Internet service. Nathan Warren, a limo driver in Newport Beach, Calif., is skimping, too. “I am eating more cereal,” he said, “and not buying clothing.” It’s the same all over the country, said Anne D’Innocenzio in the Associated Press. Faced with a decaying economy, consumers are spending less, making do with what they have, and keeping an increasingly nervous eye on their checkbooks. Retail sales figures reflect the spreading gloom, said David Greising in the Chicago Tribune. January retail sales were the worst since 1970, and shoppers are forsaking Coach and Nordstrom’s for Wal-Mart. “We’re just being more intentional about our spending,” said Michael Valentis, a building executive who is resoling his old shoes and has postponed buying a new computer. “Where it used to be a lot easier to say, ‘That looks nice, I’ll buy that,’ now it’s like, ‘Do I really need that?’”

Even people not directly hurt by the downturn are cutting back, said Stephanie Rosenbloom in The New York Times. When stock markets are falling, banks are laying off thousands, and “the world seems topsy-turvy,” it’s comforting to do something to establish some sense of control. That’s why Betsy Illium, a well-to-do Manhattan marketing consultant who owns four apartments, recently started getting her Yorkie groomed at Petco instead of a private groomer. She’s even sending her sheets and towels to a laundry service instead of a dry cleaner. “It’s frightening,” Illium says of the declining economy.

The change in spending habits may be long-lasting, said Peter Goodman, also in The New York Times. Much of the extravagant spending of recent years was driven by people who became flush with cash after taking advantage of low interest rates by refinancing their homes. Now that their home values are crashing, many Americans are “saturated with debt,” and have been shocked into living within their means. In a country where personal spending accounts for 70 percent of the economy, the transformation will be painful. “I was conditioned to just whip out the plastic without thinking about it, and it just got out of hand,” said Barbara Runion of Maryland, who now buys only what she can pay for in cash. “Times are really hard. We’re doing an about-face, across the board.”