A survey conducted by a very large bank found that:
“…consumers across all socioeconomic levels and ethnic groups have made permanent spending and savings adjustments to adapt to the current economic situation. According to the data, 63% said the way they spend and save has been forever changed as a result of the economic downturn. Only 29% said spending and saving would go back to the way it was before the recession.”
Hogwash.
The study is basically claiming that the mindset of that 63% goes like this:
“Yeah, things are tight right now, so I’m spending less than I used to. But when the economy gets better, and I’m making more money, I’m not going to buy that high-def TV I want, I’ll continue to drive my 10 year old car instead of buying a new one, I’ve come to realize that going out for dinner is highly overrated, and my wife has discovered that she’s really quite happy with the clothes and shoes she already owns.”
This doesn’t happen on this planet.
People may say that their changes in spending are permanent — but I’m betting that those changes are only temporarily permanent.
Surveys – the reporting of ideals and notions of what respondents say they should be doing but are not? Probably not entirely true but I think there is a large group that is accumulating credit card debt to replace income in order to sustain current habits.
If a large bank conducted the survey as well they may likely be seeking “data” as to why their balance sheet isn’t looking so hot.
You are dead on. Once the recovery is in full swing, everything is back to where it was before. These momentous events that are supposed to bring us back to basics and focus on what really matters fade quickly from people’s memory. We’re all overly pessimistic when times are bad and overly optimistic when times are good.
Ron, have we ever discussed any survey that was a good predictor of stated behavior(s)?
Wasn’t the savings rate negative prior to the meltdown? So maybe people don’t mean they are “saving more.” Maybe they are just going into debt less.
Americans seems to love spending every penny they make. The only question I have is how long will the recession be? Because it seems like there are fewer people making fewer pennies.
Joe, Craig, JP: Thanks for your comments.
I think Joe nailed it with “the reporting of ideals and notions” comment.
Agreed; but I can imagine people changing how they spend: switching from one form of conspicuous consumption to another, away from high-def TVs to green-local-whatever
Hi, I followed Taylor over here cause his comment caught my eye. Consumer intention prediction from surveys is notoriously poor, as mentioned above, so any conclusion that claims ‘permanent change’ seems a bit odd if written by someone who knows their stuff. However, the idea that long term spending patterns and habits could have shifted due to events of last year are not so far fetched. A shift from material to experiential, green, higher quality, or even a preference to stuff mattresses with cash would not be surprising for folks who felt the downturn directly.
Right on, Ron.
Same goes for the “2/3rds of Americans” who “Object to Online Tracking”, as reported in the NY Times today: http://www.nytimes.com/2009/09/30/business/media/30adco.html?hpw
To think of all the time and resources wasted to come to that scurrilous conclusion…
Fred: Thanks for commenting. Certainly, it’s not far-fetched that long-term spending patterns could be changed by the recent economy.
But honestly, I’m not betting on it.
First off, because older consumers have been through recessions before. If my spending patterns haven’t changed as a result of previous downturns, why would this one do the trick? Because the financial industry collapse was a driver and differentiating factor of this recession? I’m not seeing how that will impact spending.
Second, for younger consumers (Gen Yers) experiencing their first post-school downturn, their spending patterns are in constant flux as their income continues to rise throughout their 20s, and their spending habits changes w/ lifestyle changes like marriage and having children.
Third, we, as a society, are hardly very disciplined in our money management matters. Given a few more dollars in our pocket, we’ve usually spent it. There may be some folks who think we’re all of a sudden different. Maybe. We’ll see.
Nothing to disagree with you there Ron. Part of the question may simply be what level of fear/discomfort any single individual actually experienced. Given the apparent success of efforts to avoid a Great Depression type monetary lock-up the level of joblessness may be kept in very low double digits and huge parts of the population may actually be seeing great opportunity from the price declines that are wiping others out. It may be that the folks who change behavior will be so small a percentage of the future economy that from a macro level no real change is seen. Lot depends on whether the bad news is really past of course.