With the sharp drop of the first phase of the economic contraction behind us, we’re moving into a time of wariness and grinding it out. It’s as if consumers breathed a big sight of relief in the Spring as they realized that the economic free fall had come to a slow. Now, a few short months later, consumers are girding themselves for the tough realities of a shaky economy, the anticipation of continued job losses and a consensus that trying times still lie ahead.
Several reports were issued last week that gave color to how consumers are organizing themselves.
BIGresearch’s July monitor, which took the temperature of consumers in the first week of the month, shows flagging consumer confidence and an increase in the percentage of consumers who believe their belt-tightening will continue well into the future.
The diminished expectations have increased the commitment to frugality.
More evidence that consumer spending will endure long-term restructuring: about nine in ten (88.9%) believe the current economic crisis will impact their lifestyles over the next five years…the majority (52.1%) simply plans to consider each purchase more carefully, while almost as many (48.8%) intend to be more price-conscious when buying food and clothing. Additional plans include sticking to a budget (46.7%), dining out less (45.2%), and not racking up a large amount of credit card debt (42.4%).
In very concrete terms, the expectations for the holiday season are reduced below the already supressed results of last year.
A look at Gallup’s daily tracking trends shows how the shift in sentiment has leveled off. As the outlook for the economy has stagnated, the consumer mood has begun to decline.
It’s the kind of grumpy feeling you get after having great results on a diet for a few weeks and then leveling off. You realize that the work is going to be long and hard, and, if you’re honest with yourself, you just don’t want to do it.
That’s what we’re confronting now as consumers. The reality that there is no quick fix, that the marketplace is going to be in tough circumstances for some time, and that the changes we’re implementing in our lives are going to be pretty permanent.
Does it mean that bad times are ahead? I’d venture that it means that the American consumer is being pragmatic and prepared. We know that more pain is ahead. We hope that it doesn’t hit us. And, in the meantime, we’re going to go about life as best as we can.
