Consumer Spending Will Shrink For The First Time In Nearly Twenty Years

Consumer spending, the engine that powers our economy, is probably going to shrink for the first time in nearly two decades, says the NYT — a move that will “all but guarantee” that the current economic crisis will deepen.

From the NYT:

In response to the falling value of their homes and high gasoline prices, Americans have become more frugal all year. But in recent weeks, as the financial crisis reverberated from Wall Street to Washington, consumers appear to have cut back sharply. Even with the government beginning a giant bailout of the financial system, their confidence may have been too shaken for them to resume their free-spending ways any time soon.

Recent figures from companies, and interviews across the country, show that automobile sales are plummeting, airline traffic is dropping, restaurant chains are struggling to fill tables, customers are sparse in stores.

When the final tally is in, consumer spending for the quarter just ended will almost certainly shrink, the first quarterly decline in nearly two decades.

The Times says that when the government releases the numbers this month, they are expected to show that consumer spending shrank by 3%, which would be the steepest decline since 1981 and the only decline since 1990.

Consumers are apparently buying more groceries, enjoying fewer meals out, and spending less on clothes, school supplies, and air travel. Nintendo Wiis, however, are still flying off shelves.

“My view is that when consumers get concerned about their nest egg, or their country, they need entertainment,” said Bo Andersen, president and chief executive of the Entertainment Merchants Association, which represents distributors and retailers of home entertainment products.

Full of Doubts, U.S. Shoppers Cut Spending [NYT]
(Photo: robinryan )


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  1. ElizabethD says:

    It’s great that we’re being more frugal, IMO. But I feel for the folks who will lose jobs as a result. [Disclaimer: Husband has been out of work for 17 months now, with no offers or even interviews forthcoming.]

  2. Jevia says:

    My husband and I have definitely cut our eating out. Interestingly when we do eat out, the restaurants we go to are always full and we have to wait. Maybe we just pick ‘good’ restaurants that everyone lines.

    • pecan 3.14159265 says:

      @Jevia: We waited about 40 minutes to get a table at PF Changs last week, and that was on the low end of the wait. A few minutes after we got our pager, some people walked up and were told the wait was an hour. During this time, my mom was like, “and they say we’re in a recession…”

      • Raiders757 says:


        40 minutes!? Dang. It must have been coupon week. Speaking of which. You would think the sunday paper would be full of restaurant coupons these days. I think I have seen one or two in the past month. Back in better economic times, the paper was full of $5 off and by one get one half off coupons. Seems there should be more in down times like these.

        I must also say that i’ll never wait more than 15 minutes to eat anywhere. Every bit of time that slips by in life, is time you can’t get back. I’ll be damned if i’m going to spend it waiting outside a restaurant chain. I’ve never understood why people wait so long, when there is better food at a mom & pops place not far down the road in every single town in Aemerica. One can always come back at a less busy time, or some other day.

    • Starfury says:

      @Jevia: We’ve cut back on our eating out a lot; for a family of 4 at someplace like Red Robin it’ll run almost $40. I can cook a LOT of dinners for that much money and the food is just as good or better than the restaurant food.

      Except for the deep fried stuff. I don’t have one of those.

  3. mdoublej says:

    I thought the worsening economy would mean better deals in the stores, but I was in a Macy’s yesterday, and the sales didn’t seem as good as they used to be.

  4. Fist-o™ says:

    Good thing I still have my $400 check from George W! Now I can go out and stimulate the economy! not.

  5. Ayanami says:

    Maybe companies will start to realize that their customers shouldn’t be taken for granted and things like good customer service will actually be the norm. But of course this won’t happen. They’ll use all the “marketing” and “cost-cutting” tools they have until they run into the ground.

    Companies, (especially the BIG ones) Haven’t had to fight for our dollars for a long time, so long I think that they’ve forgotten how to do so.

    • axiomatic says:

      @Ayanami: Not only do I agree with you, but I actively seek out companies with the best customer service and buy from them.

      (Yes, it is getting harder each day to find a company “good” at customer service.)

      I recently stopped buying anything from ASUS because their customer service flat out sucks. However I have become a big fan of OCZ Technology because their support is excellent.

    • warf0x0r says:

      @Ayanami: I always joke on here about canceling my comcast service, but recently I’ve started to do the number crunching and it’s starting to not make good financial sense to have my rates increase every year, get fewer channels, or have to pay more just to get HDTV capable boxes when I could completely survive with basic cable… I’ve always just said, “give me the premium channels.” Now, I think that I could live without them and a lot of other options.

      • battra92 says:

        @warf0x0r: And you can get a heck of a lot more channels with just a good antenna that you could even five years ago so yeah, there’s money saved there.

        My folks will have none of that, though.

    • Con Seannery says:

      @Ayanami: See, their cost-cutting involves axing support and service to save a buck, so that idea’s out the window.

  6. Rectilinear Propagation says:

    Even with the government beginning a giant bailout of the financial system, their confidence may have been too shaken for them to resume their free-spending ways any time soon.

    Confidence? Damn it, we don’t have any farking money! Even if we did believe the bailout would solve everything that doesn’t mean we can afford to buy anything.

  7. papahoth says:

    that’s because we are a nation of whiners. or all the bad news from the media is scaring people. or obama is scaring people. remember, the tax cuts are working.

  8. Jonbo298 says:

    Long overdue for consumers to stop being so credit hungry/happy. We reached a breaking point, now we must pay off our debts and try not to repeat this fiasco again. But as it has happened in the past, we’ll get to happy times, become credit spending happy, and then start another economic downturn.

  9. JohnDeere says:

    just got my christmas loan at the credit union. 5% for a year. went and got a wii. lol. this is funny.

    • jakesprincess says:

      @JohnDeere: You got a gonga at 5%. My credit union statement came the other day and inside was an insert promoting the 9.5% holiday loan rate they now have—exhorting one to have a great holiday no matter what. I took one look at it and called my father, whereby we commiserated on the sorry state of this country.

  10. Norcross says:

    I’m surprised it took this long to happen. We’ve been on a credit orgy for a while, so it’ll be interesting to see who survives and who doesn’t, from a business perspective.

    On the consumer end, I think it’s in part due to (a) people have bought all the crap they can, and (b) realized it didn’t make them any happier

  11. battra92 says:

    Part of me sees this as a good thing and part of me doesn’t. I am all for living frugally but I hope that this puts an end to the wasteful ways we’ve been. I would love to see the days where a toaster could be had that would last you decades, not 3-4 years. People buying high quality furniture instead of Ikea or Target particle board specials.

    Sure people 50-100 years ago had less but they had better stuff.

  12. Gokuhouse says:

    Well, let me say that we started spending less when we found we had to put most of our expendable money into gas for ours cars…Went from something like 100-150 a month to 300-400 a month….We even went away from burning propane to heat our house during the winter to using mostly wood, 80% wood and 20% electricity. Switched our kitchen stove and our hot water heater to electricity as well. So far during the summer we’ve only seen a 15 to 20 dollar a month increase on our electric bill.

    /Single income family of 4

  13. fuzzymuffins says:

    doesn’t seem to change my spending much. i haven’t had credit for 8 years, so it’s impossible for me to spend any more than what i make… my job is pretty secure so i’ll be fine.

    but geeeee do ya think spending is down because people are FINALLY being hit upside the head with the fact they they to stop spending to pay back all the credit they racked up?

  14. chauncy that billups says:

    I went out to dinner friday night and a mid-priced restaurant. The place was packed. Though it will be worth seeing what the crowd is like in 4-5 months…

  15. OzoftheJungle says:

    I went over to Shells (it’s kind of like a glorified long john silver’s, in case you’ve never heard of it)for lunch today and there was a sign on the door that said that shell’s was filing for bankruptcy protection.

    The sad part was that the sign wasn’t for patrons, it was for the employees, the sign listed a number for them to call.

    I did a quick search on google and it seems that it’s been coming for the last month, and they’re selling off their assets.

  16. TPS Reporter says:

    Every restaurant around here seems to be packed and the grocery stores at least are packed like crazy on the weekends. So it doesn’t seem like people are eating at home more. Of course we don’t have alot of restaurants around here for the amount of people so maybe that comes into play.

  17. Trencher93 says:

    Yeah, but look at who’s saying it — Circuit City? Come on, they need any scapegoat they can get for their death throes… Most companies are going to talk up this bad news as much as possible to cushion their future with low expectations. Chain restaurants? Circuit City? Overpriced stuff? Probably in the tank, anyway…

  18. EricLecarde says:

    Cut consumer spending?? I’m doing all I can within my paychecks confines to spend more.. and not just in my local economy. My wife and I are going on more vacations now (usually by driving to our destinations). I’m hoping that our little contributions will help with the economy, but its not why I’m doing it. I just really enjoy traveling.

  19. Outrun1986 says:

    The restaurants are packed here too, but that could be because there are fewer of them now, we did have a whole bunch of restaurants close up around us. That or people are just eating more. Personally I have stopped eating out for health reasons, my goal is to try and not go out to eat at all next year. It probably won’t happen though because I am sure I will be dragged along on at least one occasion. The grocery stores are so packed here you can’t even move in them and they are constantly running out of products

  20. knyghtryda says:

    I don’t know if I’m spending less, but i do know I”m not shopping retail much anymore. Most of the stuff I buy is used, and that includes electronics, car parts, and furniture. The only none grocery item I really buy new is clothes, and thats cuz I don’t dress fancy so I can get away with $12 jeans and $5 shirts. Living life isn’t about pinching pennies, its about use what you have to the fullest. Give up a little luxury (and just a little… cuz you still get what you want in the end) and you’ll be spending wiser and getting more.

  21. Triterion says:

    Whew, good thing I make video games for a living! I’m still spending less tho, because now that everyone else is doing it, I don’t need an excuse!