Not Everyone Is Having a Lean Time

October 29th, 2010

Some people are back to spending their money
The divide between the haves and the have-nots is growing if spending is any measure of the difference. Some consumers are out in the malls buying luxury items but spending remains tight for everyday essentials such as food and dental care, suggesting a growing divide between haves and have-nots. Government data show that the purchases of TVs, jewelry, recreational vehicles and pet supplies are on the increase. It also shows that spending on medical care, day care and education is down in the dumps.

The rising tide
“The rising tide isn’t lifting all boats,” says Carl Steidtmann, chief economist at the Deloitte accounting and consulting firm and author of an index tracking consumer spending. He says higher-income and older households, helped by a strong stock market, are experiencing increased wealth and spending more. However, high unemployment is pulling in the other direction, depressing spending among people without jobs and those anxious about job security.

Spending in decline
More than one-third of the 350 spending categories tracked by the government remain in decline, as if the recession that technically ended in June 2009 was still underway. Spending on new cars has fallen another 8% this year, on top of disastrous drops in 2008 and 2009. Consumers are spending less on prescription drugs, life insurance and a wide range of everyday essentials while spending more on watches, wine and toys. Part of the jump in luxury items is a rebound from deep lows in the recession. Look at these indicators:

Television sets
Spending is up 35% this year, tops among consumer items. “There’s lots of excitement because of 3-D TVs, bigger panels and high definition,” says Best Buy’s Scott Morris.

Recreational vehicles
Winnebago sales have doubled. The company added 350 workers. Buyers, typically 55 or older, are purchasing somewhat less expensive RVs, says Winnebago spokeswoman Sheila Davis.

Pet supplies
Organic dog food, timed cat food dispensers and other high-end pet items are driving healthy increases in spending, says Bob Vetere, president of the American Pet Products Association. “People are cutting back on themselves more than they’re cutting back on pets,” he says. Pet products illustrate how some consumers are going high end and others low end. Cheap pet food is selling briskly, reflecting the weak economy, at the same time costly items are thriving, he says. It’s the middle of the market that’s shrinking, he says.

Entertainment
This depends on mass appeal and is still hurting. Spending at concerts, movie theaters and casinos is down. The revenue decline at casinos is starting to stabilize, says Frank Fahrenkopf Jr., president of the American Gaming Association. “We’re not going to see a dramatic turnaround until employment picks up,” he says. “We’re still packing people in. They’re just spending less.”

The malls
Winter fashions are in the windows and everyone is stopping to look. The big question is, are people buying? I, for one, am waiting. I may decide to spend this winter in tee-shirts and shorts.

This entry was posted on Friday, October 29th, 2010 at 8:44 am and is filed under Finance, Money, Personal / Internet. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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