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Consumers’ expenditure increase don’t reach economy

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May 9, 2011

New data just revealed how consumers are increasing their spending in eating out, seeing movies, and shopping at local malls. However, the general economy isn't seeing huge improvements in the United States. That, according to new data

out from Gallup, which finds that although consumers are spending money, those spending totals year to year are basically flat.  Following  data in April 2011, consumers spent about $65 per day compared to average spending totals of $64 per day in April 2010. This, even though the cost of many commodities has increased in the past year; the 2011 numbers are nearly that same as 2009 numbers, as well.

Diving a little deeper into the results, upper-income consumers are spending slightly more, but not enough to change the flat rating. Gallup found that in April upper-income spending increased to $112 per day (average) from $108 per day (average, March). Meanwhile lower income consumers are spending basically the same: $58/day average compared to $57/day average (March).

The report authors suggest, "Economic confidence is plunging. Gas prices are surging, as are food prices. Although job creation reached a post-recession high in April, it has been essentially flat for the past three months. Neither upper-income consumers nor their middle- and lower-income counterparts are spending more than they did a year ago. So it seems unlikely that the nation's retailers will be able to match their May 2010 sales levels and, simultaneously, it is increasingly likely that the slowdown in economic growth during the first quarter will continue in the months ahead."

Why aren't consumers spending? Some experts believe the 2008 recession actually changed spending habits of all income demographics. Over time those changes - spending generally less, price comparing and coupon utilization - may change, but for now the recession is still close in the memory banks, keeping consumers from spending more money.

"The story here is that the consumer is somewhat resilient despite rising gas prices and ongoing concerns about the labour market," said Ken Perkins, president of Swampscott, Mass.-based Retail Metrics. Strangely enough, national retailers reported stronger than expected sales during the month of April, boosted by Easter holiday shopping and stronger consumer confidence. Confidence among U.S. consumers also rose more than estimated in April as six straight months of job gains buoyed the spending that makes up about 70 percent of the economy. Retailers also benefited from the Easter holiday falling on April 24, 20 days later than a year ago. For instance, Limited, operator of the Victoria's Secret chain, boosted sales 20 percent, almost double the average gain of analysts' estimates compiled by Retail Metrics, which tracks more than two dozen U.S. chains. Sales at Macy's, the second-largest U.S. department store chain, rose 10.8 percent, also surpassing projections.

Overall, same-store sales rose 8.7 percent, compared with projections of a 7.7 percent gain for the chains tracked by Retail Metrics. That marked a 20th straight increase from September 2009. Retailers as a group posted a gain of 2.2 percent in March, surpassing projections for a drop of 0.5 percent.