Consumers Loosening Purse Strings


Some Reasons for Optimism this Selling Season

Good news for retailers in today’s Wall Street Journal: personal spending in February rose 0.3% from the month before, the fifth consecutive month it has climbed. That’s pretty interesting for three reasons:

  1. February had plenty of really bad weather in many major markets across the East and South, enough to keep many shoppers at home;
  2. Personal income was flat from the previous month so consumers didn’t have any extra money to use for shopping, and
  3. Consumers have reduced the amount they are stuffing into savings accounts, perhaps giving them more money to use for discretionary spending.

Consumers were spending at an annual rate of 3.1% in 1Q, according to the WSJ, the strongest pace since 1Q of 2007. The report says consumers are spending money on big ticket items, such as furniture.

Now, I don’t know if furniture is considered a necessary purchase or a discretionary one. But this seems to track with an item I wrote recently about the huge interest in the appliance rebate programs in Minnesota and Iowa. Here are the details on those programs and the overwhelming interest consumers in those states showed in making major purchases.

Another interesting trend cited by the Journal: Savings as a percentage of after-tax income has fallen recently. Consumers are saving less today than they did last year. Last month, this savings rate dropped to 3.1% from 3.4% in January. By comparison, in 4Q 2009, the rate was 3.9%, up from 1.5% in 4Q of 2007.

While consumers had been socking away more into savings and paying down credit card debt this could be changing. And if there is some pent up demand for motorcycles, we may see increased buying this season.

One more bit of good news from the Journal: March’s monthly employment report due out this week is expected by some to show an increase of 275,000 jobs, compared to a loss of 36,000 jobs in February. By mid-year, the report said, we could be adding 100,000 jobs each month.

All in all, a few bits of encouraging news in an otherwise gloomy landscape. JD

Contact me with story ideas and news items at 952/893-6876

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