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Monday, October 5, 2009
6:03 PM TweetThis
  • Maybe the "New Frugality" isn't a sure-thing culture shock, says James Surowiecki. Could be that people are spending less just while they have less - and not even that much less. Most of the consumption drop can be traced to gas and cars, and spending's been rising for four months.
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This news story has 9 comments:

  •  
    Im not so sure I buy that explanation; Interesting articles attached:

    Is the Economic Storm Over? Consumers Weigh in on the “New Frugality” www.etfdesk.com/headli...

    Study: Consumer spending cuts reach across incomes
    www.etfdesk.com/headli...
    Oct 05 06:30 PM | Link | Reply
  •  
    i think we consumers relearned the same lesson from the 20s and 30s. the 20 were just about as free wheeling as the 2001-2007 time frame. and that shock to the consumers of the day changed a lot of habits. we are likely to revisit every one of them.
    Oct 05 07:05 PM | Link | Reply
  •  
    I think history will file the "New Frugality" in the same dustbin with the "Death of Irony" after 9/11... I'd give it another 6 months, max.
    Oct 05 07:07 PM | Link | Reply
  •  
    I don't buy it (pun intended). The greatest profits in retail and dining during the bubble years were being made at the expense of high-end aspirational clientele trying to flaunt their success. Every decent restaurant I have been to in the last year in southern California has been pretty quiet. I have not waited for a table or been turned away in so long that I can't remember the last time. Last Friday, my wife and I dined with good friends at a one-star Michelin restaurant (a one-star Michelin restaurant does not imply bad, quite the opposite) in Los Angeles for lunch. It was a beautiful fall day, and we lingered over lunch for two hours without another party in the whole freakin place! I felt bad for the staff.

    I was in Vegas three weeks ago, and man, that was grim. Sure, there were plenty of people milling around, but I didn't see much gambling in any of the casinos -- certainly nothing like the action you would see a few years ago. The only energetic crowds I saw were in the sports books, which are notoriously unprofitable (or low profit) for the casinos. I had to rub the smoke out of my eyes when I saw nickel and dime slot machines at some of the better casinos -- that was shocking! Nickel slots, and not anywhere close to Fremont Street. That was a tell if there ever was one.

    Sure, we are still buying gasoline, groceries, school clothes for kids, but expensive meals, exotic vacations, new luxury cars (check autotrader.com for how many people are dumping their 2005-2007 BMW, Porsche, Mercedes around your area) are toast. Yes, we still have a core group of affluent consumers, but they are not nearly enough to support all the golf resorts (Pelican Hill, Monarch Beach, Trump National) and posh steakhouses (anyone been to Mastro's, Morton's or Ruth's Chris lately?). At least that's what I see here in southern California . . .
    Oct 05 07:28 PM | Link | Reply
  •  
    another possible reason for the new frugality becoming permanent. part 1, the boomers are starting to retire. years ago many were worried about needing new employees (they fixed that by sending jobs offshore). well now they are more concerned with saving for retirement (or making up for that big hole that just showed up). part 2, the follow on generations make a lot less than the boomers (and make less when compared to the same boomers at the same age). so they spend a lot less. combine that with different spending habits ( they tend top be more interested in electronics as opposed to transportation). you will end up with a lot less spending (as electronics tend to drop in price over time)
    Oct 05 07:37 PM | Link | Reply
  •  
    I would agree with the author's thesis, which the commenters seem to have missed: people aren't really spending less. Americans are an optimistic lot, and almost everyone under the age of 50 wouldn't know "hard times" if it kicked them in the ass. I see no frugality in my circle, but I am sure it will soon be imposed on them.
    Oct 05 08:37 PM | Link | Reply
  •  
    I am seeing more savings in some areas, but quite a bit of that is to make up for 401k/IRA losses, I don't see that much extra frugality among the under 50 crowd - especially in the 25-35 unless they are out of a job.

    If things really stay bad for a while, and the government finally stops extending welfare/unemployment/b... then it might happen. But right now, everyone has this idea that things will never get really bad because the government will save them.
    Oct 05 09:45 PM | Link | Reply
  •  
    “I must say, I never expected to see the day where I would be talking about anything other than reducing the debt, I'm running into the tyranny of zero, which is where you can't reduce (the debt) any more”

    Alan Greenspan quotes
    Oct 05 11:15 PM | Link | Reply
  •  
    If you look at the personal consumption expenditures and you take out
    the drop in gas prices you will see consumption has stayed flat.Now
    that is a big deal but the response by businesses has been way over done.
    Oct 06 03:42 AM | Link | Reply
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