Americans ‘Being Careful’ About Discretionary Spending.

A just-released survey of consumer spending by leading market information company The NPD Group, Inc. reports 76 percent of consumers are “being careful” about spending on discretionary products and services. Nearly one-third (29 percent) claim they are “being very careful.” Interestingly, at the time the survey was conducted, (March 4 –11, 2003) soaring gasoline prices were more of a factor in suppressing discretionary spending than terrorism or threat of war.

According to NPD, forty-one percent of consumers plan to spend less than usual this March, April and May. Only 14 percent are planning to spend more than usual, while 45 percent plan to spend about the same as usual.

It is clear consumers are reassessing their discretionary spending priorities as spending cutbacks cross price ranges and are not limited to one price category. Nevertheless, many consumers appear to be curbing spending on high-ticket items. A significant percentage of consumers plan to spend “much less than usual” on: major appliances (49 percent), consumer electronics (44 percent), jewelry (44 percent), furniture (42 percent) and computers/software (37 percent). More moderately priced categories, where consumers said they would spend much less were: cookware (43 percent), small appliances (40 percent), perfumes/fragrances (38 percent), video games (38 percent), toys (36 percent) and music (35 percent).

Less likely to change is consumer spending on fast food, where only 21 percent of those surveyed said they intend to spend “much less than usual” on this product in the next three months. Other products that will be more resistant to spending cuts are: clothing/apparel (22 percent), skincare/makeup and cosmetics (23 percent), eating at full service restaurants (24 percent), shoes/athletic footwear (28 percent) and entertainment (28 percent).

What will most impact consumer spending are the factors that touch them personally. NPD reported 46 percent of consumers indicated the price of gasoline will affect their spending over the next three months. Forty-five percent and 41 percent of consumers respectively said their personal employment situation and the economy are factors that will affect consumer spending over the next three months.

Somewhat surprisingly, at the time of the survey, consumers said war worries (24 percent), current company situation (22 percent) and current stock market trends (21 percent) are less of a factor affecting spending plans. The threat of terrorism (13 percent) and international government relations (12 percent) are the least influential factors affecting short term spending plans.

Intent to purchase American-made products is not as high as one might think, given the current political situation. On average just 17 percent of consumers plan to buy significantly more American-made products in the near future. Just nine percent of those aged 18-34 are planning to buy more American-made products in the next three months. A greater number of those age 35 or older (18-19 percent) claim they plan to buy more American-made products.

According to the NPD survey, loss of a job or becoming unemployed has the most impact on a consumer’s current and future spending patterns. Fifty-one percent of those who recently became unemployed are spending “very carefully” and 63 percent said they will spend “less than usual” in the coming three months. Interestingly, starting a job affects consumer spending behavior. Forty percent of those who started a new job plan to spend less than usual.

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