Tuesday, April 6, 2010

Personal Income is Still Low but Consumer Spending is Rising Again

According to this article, personal income fell in 42 states in 2009. Yet, according to this article, consumer spending is back on the rise and looks to be sustainable.  We have record unemployment but the consumer market is getting better…huh.

This tells me that some people have not taken their new situation into account or the lucky ones aren’t preparing for the worst.

My husband and I are the “lucky ones” since our income didn’t fall. Neither one of us got raises, but we also didn’t get cuts. We have a solid emergency fund and several savings accounts in case the worst happens, but so far, we’re okay. But we haven’t increased our spending in the last 2 years either.

So, we are obviously not contributing to the stats of either article.

Since we know friends that have had pay cuts or gone through job losses, it’s easy for me to understand that personal incomes as a whole have fallen. I just don’t understand how consumer spending is rising…

Do you know anyone who’s started spending more than they were over the last 2 years?

Oh well, at least the economy will be puttering along pretty well by the end of 2010. Maybe some jobs will open up and personal income levels will rise as well.

13 comments:

  1. I know my wife and I have been spending more. That's a function of my job change and the elimination of some debt. I'm actually making about twice what I was back in 2008, so our spending, as well as savings, has increased since then.

    I think most people are resuming their old patterns, now that it doesn't seem like the sky is falling.

    ReplyDelete
  2. I suppose this is what is called "pent-up" demand. Spending junkies had to hold back for a couple of years and now they are back in the game. I know that my sister and brother-in-law have been on the spending wagon for a few months already.

    ReplyDelete
  3. I know my personal spending has gone up, but that was because I now have 2 children instead of one. My first is still in her crib, so we had to buy another crib for the 2nd child.

    Our base income has increased year after year, though we haven't changed much in spending other than for our children in the past 2 years. In fact, I think I am spending less this year than I did in 2008 (when our older child was born).

    ReplyDelete
  4. Wow - 25% of people in that linked article said they don't even think about saving or investing! I'm happy to be in the 75% majority and we are definitely spending less compared to last year. I don't see any other way if you want to be debt free.

    ReplyDelete
  5. MikeS, yeah, I could see spending more if you have increased your income significantly...but that hasn't happened with the majority of the population. I think ctreit might have hit the nail on the head with spenders giving up...

    ReplyDelete
  6. Julie...whoa...two kids in cribs. Yeah, I see a few expense increases that could come up. :-)

    ReplyDelete
  7. SAHM CFO, I'm happy to be one of the 75% too. I couldn't imagine having no plans for my future...

    ReplyDelete
  8. BFS, Don't even get me started on diapers. At least I don't use formula! I think that would kill me! You would think cloth diapering would save some $$ but I have a shopping problem when it comes to those and my husband won't touch them... so they get used when I want to use them. Thank goodness my FIL bought us our second glider/ottoman set. That was another $600 I was not looking forward to spending.

    I also agree with ctreits about people who have been itching to spend now finding excuses to do so.

    ReplyDelete
  9. Julie, I remember how many diapers my youngest sister went through in a week. And you have two. Just wow...

    Good luck!

    ReplyDelete
  10. Nope...not if I can help it.

    But I think some new spending is a function of things wearing out. Major appliances are engineered to konk out in 7 years--so I was told by a Sears repairman. They also are designed so that repairs often come close to or exceed the cost of a new appliance, making it not cost-effective to delay buying. If your washer was four years old when the economy crashed, it may be about to die on you.

    That said, I also think there's a herd mentality where spending is concerned. Some people will start spending exuberantly for no other reason than that they hear the economy is getting better or that their friends have started buying.

    ReplyDelete
  11. Funny about Money, I knew our appliances wouldn't last forever, but 7 years seems a bit much...that sucks. Glad we have a maintenance fund building up...

    I agree that the herd mentality seems to have an even greater effect than anything else.

    ReplyDelete
  12. Our spending is not up; but that's because I'm focused on our debt snowball.

    However, i agree that is pent-up demand. People can only put off buying some items so long.

    ReplyDelete
  13. I def. agree on the herd mentality thing... believe it or not, as much of a bad rap as "keeping up with the Joneses" has gotten over the recession, I am seeing people around me starting to do that again. I am a little shocked (not too much but)... you would think that they learned.

    ReplyDelete