Commentary

Change Noted In Consumer Spending Expectations

According to the latest ChangeWave survey of U.S. consumers, conducted January 5-9, editors Paul Carton and Jean Crumrine suggest that this latest survey shows some intriguing signs that consumer spending may finally be stabilizing after a prolonged slowdown. While overall spending still looks terrible, they say, the 90-day outlook is not quite as horrible as it was in the December 2008 survey. Fifty-seven percent of U.S. respondents said they'll spend less during the next 90 days than they did a year ago -- but that's three points better than in the December survey. Another 13% said they'll spend more -- two points better than previously.

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Consumer Spending Intentions For Subsequent 90 Days (% of Respondents)

Survey Date

Expect to Spend More

Expect to Spend Less

Sep 2006

36%

25%

Nov 2006

36

19

Jan 2007

35

24

Sep 2007

36

26

Nov 2007

32

25

Jan 2008

29

34

Sep 2008

18

52

Nov 2008

10

59

Dec 2008

11

60

Jan 2009

13

57

Source: ChangeWave Research, January 2009

Respondents were also queried on their current impressions of the economy and, once again, while things look bad, they don't appear quite as awful as they did in December. 12% said they think the economy will improve in the next 90 days, three points better than in December. 56% said they think the economy will worsen during the next 90 days, but a significant 10 points better than the December low.

Other sentiment indicators also show some improvement, according to the study.

  • 5% said they are very satisfied with the current state of their personal finances, up one point from the record low in December, while another 39% said they're somewhat satisfied, up eight points
  • Twenty-six percent said they are now more confident in the U.S. stock market than they were 90 days ago, 13 points better than previously. Only 31% said they're less confident, a 25-point improvement
  • Among those U.S. consumers who said they're spending less, reduced income, saving more money, and reducing debt were the top reasons given
  • The percentage of respondents who said they're spending less in order to save more money has skyrocketed from 18% to 41% during the past six months, and the percentage saying they're reducing debt has jumped from 24% to 36%

Consumers Spending Less While Improving Personal Finances (% of Respondents)

Survey Date

Investing More

Saving More

Reducing Debt

Jan 2008

17%

28%

31%

Jul 2008

8

18

24

Aug 2008

8

21

25

Sep 2008

7

26

29

Nov 2008

9

33

31

Dec 2008

8

39

33

Jan 2009

12

41

36

Source: ChangeWave Research, January 2009

For the first time in a year, says the report, there are slight signs of improvement in restaurant spending, although the category remains very weak. Only 6% said they'll spend more going forward, while 48% said less -- a net two-point improvement since December.

Spending on household repairs/improvements has also registered an uptick from the all-time low seen in ChangeWave's December survey. Twenty-six percent said they'll spend more on household repairs during the next 90 days, while 21% said less -- a net four points better than last month.

Consumer electronics remains one of the weakest spending categories.

Only 15% said they'll spend more on consumer electronics going forward, compared with 41% who said less -- a net six points worse than the previous survey, and 22 points worse than a year ago.

Consumer Electronic Spending 90 Day Expectations (% of Respondents)

Survey Date

Expect to Spend More

Expect to Spend Less

Nov 2006

52%

24%

Jan 2007

33

30

Nov 2007

39

23

Jan 2008

27

31

Nov 2008

19

43

Dec 2008

23

43

Jan 2009

15

41

Source: ChangeWave Research, January 2009

Since February 2007, ChangeWave's consumer surveys have consistently pointed to two retail winners: Wal-Mart (net difference score = +6) and Costco (+6). But while both still lead among retail outlets in terms of spending growth during the next 90 days, Costco has experienced a significant drop in its growth rate in the past six months (from +11 in July '08 to +6 in January '09).

The greatest weakness going forward is among traditional retailers, led by Bed, Bath & Beyond (-14), Sears (-12), Macy's (-12) and JC Penney (-10).

The report writers conclude that "...for the first time since May 2008, we're seeing signs of a tiny spending uptick. Moreover, there's an improvement in consumer sentiment and expectations going forward... these improvements, however, are tenuous... Just as the May uptick was due, in part, to heightened expectations over the tax stimulus package, the current outlook may have much to do with the anticipation surrounding the new administration's economic stimulus plan... "

Read more of the findings from ChangeWave here.

1 comment about "Change Noted In Consumer Spending Expectations".
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  1. William Melnick from SAI Marketing, January 28, 2009 at 4:04 p.m.

    Based on the premise that it is more reflective to gather both hard data as well as attitudinal data on consumer circumstances and behavior than to simply survey broad thematic opinions, Brand Idiomatics, a brand marketing strategy and research firm, using a unique proprietary model that aggregates a series of specific indicators including traditional inputs as well as
    non-endemic econometric imputs has come to a different conclusion.

    While purchase intent may rise and fall with the headlines, we have revealed that the most profound behaviorial shift to come along in the last 25 years is now playing out across the entire American economy and that we are witnessing a new and fundamentally altered consumption context as well as the emergence of a new consumer lifestyle segment. We call this new segment "The Essentials."

    Culturally, Brand Idiomatics believes that we may be entering a post-disposable world and that value as a behavioral driver has been redefined as a combination of functionality, durability and price. Consumers will no longer allow themselves to be slaves to the new product cycle whereby they continually discard perfectly good products and lifestyles in search of the latest and greatest. If this is true and our analysis indicates that it is, then marketers are going to have to look beyond the current choice between aspirational marketing and retail merchandising strategies of deep discounting, product bundling or loyalty incentives.

    If we look at consumer behavior and hence outlook and confidence in the future, we can see that the aggregate psychology of the marketplace has changed. We believe that this is a secular change and do not believe that it will reverse with an economic upturn. Consumers are being influenced by more than economics and have been impacted by a change in social and cultural priorities.

    Brand Idiomatics has just published its latest whitepaper called the January 2009 Consumption Context Index on its website and can be downloaded at www.brandidiomatics.com. The attitudes, behaviors and agenda of The Essentials are fully explained and dimentionalized in this report.

    If after reading this analysis, you are interested in discussing these macro long-cycle shifts and how they will affect marketing and communications, we would be glad to meet and show you how our unique combination of analysis and strategic planning can benefit you.

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