Depressed consumers affects personal spending


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A Womens wear article on how Depressed consumers affect their personal spending.

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Depressed consumers affects personal spending

  1. 1. ORVANA ACCESSORIESAugust 2, 2011Depressed Consumers Send Stocks Sliding By EVAN CLARKFROM:WWD Issue 08/03/2011Consumers are more pessimistic, and even the wealthy are cutting back on spending, surveysshow.Photo By Beth A. Keiser/CorbisWashington skirted catastrophe, reaching a last-minute debt deal and avoiding a U.S.default Tuesday, but retail stocks had their worst day in more than a year and the DowJones Industrial Average fell below 12,000 as investors worried anew that consumerstrength is wavering — even in the world of luxe.Personal consumption expenditures fell unexpectedly in June, retreating 0.2 percentfrom the prior month. It was the broad measure of consumer spending’s first declinein a year and, together with higher savings rates and indications of a slowdown in thebulwark luxury sector, painted a sobering picture for the fashion industry.
  2. 2. The S&P Retail Index fell 3.8 percent, or 20.05 points, to 513.89 Tuesday as the DowJones Industrial Average lost 2.2 percent, or 265.87 points, to close at 11,866.62.Gold prices shot up to a new high of $1,664.20 an ounce as investors sought safety.The retail decliners covered chains across the price spectrum, including Tiffany &Co., down 8.2 percent to $73.38; Nordstrom Inc., 5.8 percent to $47.05; Guess Inc.,4.6 percent to $36.11, and Target Corp., 4.2 percent to $48.95.It could have been a much better day. President Obama signed into law a deal toraise the nation’s debt ceiling, averting a potential U.S. default that would likely havecaused chaos in the markets. But Wall Street took no time to celebrate and zeroed inon the state of the economy, two-thirds of which is comprised of consumer spending.There are signs even the well-heeled consumer is pulling back as the economycontinues to sputter.Unity Marketing’s Luxury Consumption Index, a quarterly read on how affluentshoppers are feeling, plunged to 66 in the second quarter from 82.8 in the firstquarter — the steepest drop since the first quarter of 2008, when the financial crisiswas just beginning.“It’s a forward looking index, but the last time it did this we went into a very badplace,” said Pam Danziger, president of Unity Marketing. “I’m concerned we may begoing back to a similar bad place — almost 70 percent of our sample say that therecession is not over.”The group conducts its survey every three months and last month polled 1,272consumers with average annual income of $301,800 and a median net wealth of$856,000. Those surveyed cut spending in the second quarter by 8.4 percentcompared with the first quarter and 18.4 percent from a year earlier.“These are people who are primarily working,” Danziger said. “They are in jobs ofcorporate responsibility. These are people who are in tune with what’s going on inthe world today and they’re the ones who are feeling a lack of confidence.”Last week, French retail-to-luxury group PPR said its sales growth slowed to 5.4percent in the second quarter from 9.1 percent from the first quarter. And LVMHMoët Hennessy Louis Vuitton, which posted first-quarter revenue growth of 17percent, saw trends moderate, leading the luxury conglomerate to 13 percent salesgrowth for the whole first half.
  3. 3. Broader measures of consumer sentiment also have been wavering. The ThomsonReuters-University of Michigan Surveys of Consumers showed that confidence fell inJuly to its lowest level since early 2009.So far, apparel sales have held their own and many chains are expected to reportstronger comparable-store sales results for July. (See related story, this page).Spending on apparel and footwear ran at an annual rate of $348 billion in the secondquarter, up from $344.5 billion in the first, according to last week’s GDP report,which also showed the economy grew slower than expected.A Commerce Department report Tuesday showed that June personal consumptionexpenditures fell 0.2 percent from May, an unpleasant surprise for economists whoprojected a 0.2 percent rise. Private wages fell by $2.2 billion in June following anincrease of $15 billion in May.Consumers are not just making less at work, they’re socking more away into theirrainy-day funds, boosting the personal savings rate to 5.4 percent of their disposablepersonal income in June, up from 5 percent in May.“Consumer mood is at depressed levels and those households that are not livingpaycheck-to-paycheck are saving more,” said Chris Christopher Jr., senior principaleconomist at IHS Global Insight. “This is considerably worrisome, since we are aconsumer-oriented economy.”Mark Montagna, an analyst at Avondale Partners, focusing on the value retailers,said stronger July sales could belie weakness ahead, particularly given airconditioning use during the recent heat wave. “When those utility bills for July hit,people have to pay for that,” he said. “That’s probably going to crimp some people’swallets because the bill is going to be a lot higher than people hoped. Things havegotten a lot tighter for the consumer.” We deliver worldwide, for details visit or write to