Monday, January 5

Are Americans really learning?

There's no question that we are in a recession. The job market is ugly. House values are worse. And it's best to not even mention stocks.

And so many articles are offering up all sorts of evidence that Americans have officially learned their lesson (for now, at least) and are attempting to be frugal and struggle out of debt. I can't count how many articles I've seen on this. Anecdotal evidence swoops in, and suddenly we're all back to the hard-hitting Depression-era.

I'm not convinced.

Before you start yelling, I know that many Americans did finally wake up and smell the $5 coffee. Certainly Americans are suddenly more conscious of their debt and where, exactly, past excesses have landed them. There are many people out there who are severely cutting down: selling off designer items, becoming a one-car household, and even (gasp) planning meals around what's on sale that week.

But, by and large, has America really into this frugality thing? I think that most citizens grasped onto frugality as a life preserver in their sea of debt. Now, though, they're realizing just how far away the shore is. Don't get me wrong, they'll keep holding on to the life preserver as long as necessary. But not a second more.

For example, the business world decried the holiday season as awful. What was so terrible? Well, total holiday retail sales were down 5% for November, 8% in December, compared to last year.

Remember how many people said they were severely cutting back this Christmas? If even the majority of them had followed through on this intent, wouldn't we have seen double-digit declines overall?

It's pretty easy to do, really. I was catching up with a friend today. I asked what he got/gave for Christmas. Originally, they weren't going to get each other anything, since they are in debt. But his wife told him she had her eye on a $90 present for him. So then he had to go out and find things for her. I'm guessing that was a common story in many households.

Of course, some areas did take major hits, mostly the high-end items.

This looks pretty dismal, but remember that all these negatives average out to around 6.5% ((5%+8%)/2) for the total period. So about a quarter of the would-be iPhone buyers opted out. Fewer cell phones and other gadgets got purchased.

But most of us read stories about the phenomenal season for video games and their consoles. November saw a 10% jump in video game sales. And game console numbers weren't exactly bad, either.

And, today, at the mall for the second time in two days, we had to fight to get a parking space. (I needed new shoes.) The mall was full of plenty of folks. Not all of them had bags. In fact, perhaps every 5th set of people had them. But it's hard to use this as a gauge, since people all enter and leave and different times.

What I do know is that the retailers keep hawking the sales. And it seems to at least be getting people to the mall out of curiosity. Whether they succumb to the temptation, I don't know. Only later data will let us figure that out. But they're there, and that's certainly dangerous enough, given how recently people were charging to supreme excess.

Old habits die hard -- cliche but true. If Americans are so wed to this new frugal lifestyle, they would know to avoid temptation. Malls can no longer offer entertainment, just more debt. Deep down, they probably know this. But the sales are just too alluring.

Of course, there's nothing wrong with bargain shopping. The day after Christmas, Tim and I went to the malls to hit some good deals. We got a silver ornament for $3 and got it engraved with our names and anniversary for $19 more. At the same store, we got four silver frames that we can use as future gifts. At 75% off, we spent under $10 for each.

I think we're already seeing the beginnings of frugal burnout. For upwards of 6 months, people have had to scale back severely and suddenly. Holidays made them chafe under the leash of a budget. But after-holiday sales are just the proverbial straw.

My guess is more and more people will start to backslide. Of course, this is normal. But in this economy, they can't afford to.

Time will tell if my predictions are accurate. And what effect it will have on the economy -- retail sales, credit card companies, and bankruptcy rates.

In the meantime, what trends have you noticed? What sales have you hit and what items did you actually buy?

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Blogger ManicMagic said...

And if anyone thinks that americans' have learned their lesson, here's a good experiment for you to try. Go to the mall and see how hard it STILL is to find a parking spot!! lol

January 5, 2009 at 2:26 PM

Anonymous Anonymous said...

I stay far, far away from our malls.

This year, Tom and I got each other NOTHING. And stuck to it. We kept checking with each other "you didn't get me anything, right?" throughout December.

We spent $50 on each boy. They both handled it quite nicely. They seem to understand that I am not choosing NOT to work, but there is no work right now. Oh, and that things WILL get better.

Right? Right?!


January 5, 2009 at 2:41 PM

Blogger Abby said...

Right, Dory! Because your work is awesome and soon all will know your cool visual designs. You'll have a waiting list, like the Birkin bag!

OK, but at the very least, i think your work will provide a nice little sideflow of income, which will be a wonderful addition once you find a job where they recognize your talent! (Anyone who hasn't checked out Dory's page is asked to do so. It's fun, her posts are funny and interesting and the designs are sooo purty!)

January 5, 2009 at 2:48 PM

Blogger Donna said...

I wonder if people bought video games/consoles because they were telling themselves, "I can't afford to go out so this will be my only entertainment."
I'm not saying they'll STICK to that resolution -- and of course, they'll probably keep buying games by saying, "This is our only entertainment and we're BORED with our other 47 games."
Or that they won't get pizza and beer on the way home so that they and their friends can have a video game party.
Or that their spouses/SOs will get so sick of the sound of cars crashing or zombies dying that they'll flee the house and do something that costs money.
Or that they'll start spending on medical expenses for lower back pain and repetitive strain injuries.
My god, how the money rolls OUT... ;-)

January 6, 2009 at 9:54 AM

Blogger Kate said...

I dunno. I shifted towards frugality beginning in late 2006, and I know it's no fad in my life. Whether it's a trend of the moment for others or not isn't something I can do much about. I think it's amazing that the common people are sort of figuring out a lot of things for themselves, and largely resisting the calls to spend, spend, spend - at least for now.

I never, ever shop at the mall. In fact I hate shopping. But our house was so damn cold this week that I agreed to accompany a friend who wanted to look for a good deal on a winter coat. Off to the mall we went. It was pretty desolate. Even I was surprised, though I really have no basis for knowing what is normal anymore. Very few people there, and those that I did see with shopping bags didn't have all that much.

I didn't spend a dime. Other than a few items of groceries, there's absolutely nothing I need at the moment.

January 19, 2009 at 8:31 AM


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