Survey shows poor consumer spending habitsDate posted: 11/4/15 10:45:00 AM
There's a growing conflict between what is in the best interest of the nation's economy and what is right for an individual's personal bank account, according to a recent poll from Gallup. While the nation would be best served if consumers picked up their spending habits, many people are choosing to do the opposite, reducing their spending habits while trying to save more.
Gallup reported that more than half of all respondents "strongly agree" that they are careful about the way they spend money, giving out five stars out of five. Another 22 percent agree that they are careful about spending, although less strongly, giving it four stars on the poll.
Roughly 33 percent of respondents stated that they only shop for exactly what they need, and 45 percent "strongly agree" that they always save some of their money when they receive a paycheck.
Will consumer spending pickup?
The Federal Reserve is considering raising short-term interest rates in an effort to catalyze consumer spending, according to The Wall Street Journal. Speaking at a news conference last month, Fed Chairwoman Janet Yellen said consumer spending should start to show growth despite reports of lethargic consumer habits.
"I think part of my confidence in the fact that we'll see a pickup in growth relates to the fact that I think consumer spending will continue to grow at a healthy rate," Yellen said. "And, in part, that's premised on some pickup in the rate of wage growth so that it's rising greater - more than inflation."
The Federal Reserve hoped consumer spending would improve as it started to curb its bond-buying program. But that seems to be bringing another problem into the fold, according to economist Michael Moran.
Strong growth was projected by the Federal Reserve as it tapers off the bond program that was designed to spur the economy. But that doesn't seem like it's been the case, per The Wall Street Journal.
"This report seems to present the Fed with the dreaded conflict between its objectives: slower economic growth but faster inflation," Moran told The Wall Street Journal.
As the nation comes into its fifth year of economic recovery, personal spending increased 3.7 percent and growth of income went up 3.5 percent in May from a year prior. Those aren't great numbers, as the Journal reported that spending and growth of income was usually more than five percent in the 1990s and mid-2000s.
But Moran feels like there could be a change in trends thanks to the growing employment rate.
"Consumer spending has hit an air pocket, but with the job market improving, activity should pick up," he said.
Americans trying to save
Still, the Gallup poll shows that many Americans are hesitant to dole out any substantial cash for major purchases. It also seems Americans are cutting any corners when they can.
But in the last four weeks, more than 80 percent of respondents said they bought generic or store brand goods instead of name brands, while 61 percent stated that they shopped at more than one store for similar items to get the best deal available.
More than half of all respondents said they are now following a strict budget, and 58 percent noted that they regularly used coupons when shopping in the last four weeks.
"Spending has been concentrated in the automobile sector, and consumers have less money left to spend on other things," economist Yelena Shulyatyeva told Bloomberg. "If consumers choose to spend on one thing, they'll spend less on something else. Without much of a financial accelerator, we can't have an acceleration in spending."
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