American Consumers Are Spending More - But Carefully

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Three girls shopping
Ilya Terentyev/Getty Images
American consumers are back!

That's the upshot of the latest report on growth in gross domestic product, or GDP, released by the Bureau of Economic Analysis on July 30. Reporting that the U.S. economy expanded at an annualized rate of 4 percent in the second quarter of 2014, the federal government report shows that even after a lackluster, snow-covered first quarter, the economy has made up its losses -- and then some.

"Personal consumption expenditures" -- spending by the American consumer, who we've often been told accounts for 70 percent of the country's economy -- helped to pull the economy out of its slump in the second quarter. (So give yourself a pat on the back). And yet, the 2.5 percentage points of consumer spending growth reported by the bureau still pales in comparison to the growth exhibited in such categories as "real nonresidential fixed investment" (up 5.5 percent), and "real exports of goods and services" (up 9.5 percent).

So what's up with that?

You Better Shop Around

A recent Gallup poll gives us a few clues. It turns out the American consumers who are spending again are doing so very carefully. Check out these results on how American shoppers, polled by Gallup, say they spent their hard-earned cash from mid-May to mid-June:
  • 83 percent of shoppers polled said they purchased generic of store-brand (private label) goods.
  • 61 percent say they "shopped around," visiting different stores to buy different items, depending on who had the best sale.
  • 59 percent used the Internet to research where such deals could be found.
  • 58 percent used coupons.
  • 40 percent bought "it's new to me" goods -- aka used items.
Waste Not, Want Not

Meanwhile, Gallup noted several trends suggesting that American shoppers are keeping tight leash on discretionary purchases:
  • 55 percent said they held themselves to a "strict budget" when going out shopping.
  • 52 percent agreed with the statement "I only shop for exactly what I need."
  • 75 percent labeled themselves "careful about how I spend my money."
In contrast:
  • 27 percent said that they laid out more than a week's pay on any single purchase during those four weeks.
  • 31 percent reported that they indulged in "shop therapy," aka shopping for fun.
  • 38 percent admitted to making an "impulse purchase."
The Gallup data gives a pretty clear impression that Americans are still feeling pretty miserly about their money. Perversely, that could turn into a problem over time.

After all, it's sometimes noted that what can be good for individuals (saving money, shopping for bargains and spending below your means) can be bad for the economy at large. If everyone in America suddenly starts shopping smart, saving savvily and generally pinching pennies till they scream, then who's going to be left to do all the extra spending necessary to keep the economy growing?

If we want 4 percent GDP growth to become the new norm in America, chances are, more shoppers will need to loosen their death-grips on their wallets first.

Motley Fool contributor Rich Smith is embarrassed to admit that he's probably "part of the problem" of shoppers not spending freely enough.


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18 Comments

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upendra.dama

Mucha Gracias

www.vletuknow.com

September 13 2014 at 6:38 PM Report abuse rate up rate down Reply
drpmindmender

Robert Smith
Which one's?, and if you have proof, turn them in
=================================================================

So speaks the "legend in his so-called mind", who can't remember how many illegals he's gotten deported, or how many American businesses who hire illegals he's reported to authjorities...

...How hard is it for your to remember ZERO? It's the same as your IQ.

BWAHAHAHAHAHAHAHAHAHAHAHAHAHAAHAHAHAHAHAAHAHAHAHAHAHAHAHAHAHA!

August 13 2014 at 9:16 PM Report abuse rate up rate down Reply
ectullis

Of course were spending more. Thanks to Hussein everything costs 20% more.

August 13 2014 at 7:20 PM Report abuse -4 rate up rate down Reply
ezspin42

Sure, we're spending more. My fuel budget went up almost $40/month for this year, even though I have less people in my household. Thanks again, anti-frackers

August 13 2014 at 6:54 PM Report abuse -4 rate up rate down Reply
Iselin007

If the economy doesn't turn around for the middle class soon businesses with have to unplug all those self serve registers and other automated crap because there isn't enough business to warrant supplying electricity to all this stuff.

August 13 2014 at 3:34 PM Report abuse rate up rate down Reply
Iselin007

The only ones eating well and often are the Great White Sharks. Even the bears have taken to walking erect because people aren't throwing much away today.

August 13 2014 at 3:30 PM Report abuse rate up rate down Reply
Iselin007

Lets look at reality:

Age discrimination.
Hard sweatshop production standards in box stores.
Low wage part time jobs.
Participation rate 62.9 %.

Sounds like the consumer is just waiting for the next down leg of this crappy economy.

August 13 2014 at 3:19 PM Report abuse -2 rate up rate down Reply
socioeconomist1

I spent more than a week's pay on one item.... a pound of bacon.

August 13 2014 at 11:19 AM Report abuse -2 rate up rate down Reply
1 reply to socioeconomist1's comment
trew.liberal1

So a week's worth of your labor has less value than a pound of bacon?

I bet your mother is so proud.

August 13 2014 at 11:23 AM Report abuse +2 rate up rate down Reply
1 reply to trew.liberal1's comment
socioeconomist1

don't pay to see a comedy show.... you will just waste the comedian's time.

August 13 2014 at 9:50 PM Report abuse rate up rate down
jdykbpl45

Are they paying cash?

August 13 2014 at 10:01 AM Report abuse rate up rate down Reply
jdykbpl45

Are they paying cash?

August 13 2014 at 10:01 AM Report abuse rate up rate down Reply
1 reply to jdykbpl45's comment
Iselin007

More likely the consumer is using food stamps because the job market stinks.

August 13 2014 at 3:22 PM Report abuse -1 rate up rate down Reply