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Recent reports show U.S. consumers are spending again; some are actually even ditching the whole discount mentality in favor of luxury brands, while others are making long-delayed big-ticket purchases.
Individual spending rose for the sixth consecutive month in April, this time by 0.6%, or $36 billion. Personal income was up 0.3%. U.S. gross domestic product climbed at a 3.2% annual rate for the first three months of 2010, and U.S. factory output has risen.
"A lot of manufacturers may be struggling to keep up with demand," Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, told Bloomberg News. "We're seeing clear demand improvements from both consumers and businesses that should provide a strong tailwind for several months at least."
The shift from buying cheaper necessities to comfortably splurging is shown in strong quarterly numbers from Whole Foods Market, Inc. (Nasdaq: WFMI) and Saks Inc. (NYSE: SKS). Whole Foods' quarterly profits doubled from the same period a year ago, while Saks reported a profit of 12 cents per share – higher than the predicted 5 cents per share.
Whole Foods products offer consumers a break from pinching pennies while not viewed as an out-to-dinner splurge. Consumers are putting themselves out there a little more and feel more comfortable buying some higher-end foods – and now the company's stock has gone up 83% since May 2009.
Discount leader Wal-Mart Stores Inc. saw its shopper traffic decline, saying more affluent customers are not as keen on bargain-hunting and are returning to more-upscale department stores such as arch rival Target Corp.
Businesses such as jewelers and travel agents are benefiting from this growing willingness to spend.
But don't misunderstand: Although U.S. consumers are venturing back from their spending hiatus, they remain cautious buyers.
"Today if they buy, they are not willing to be embarrassed by overpaying," Jane Bayard, executive vice president at Warburg Realty Partnership of Manhattan, told The New York Times. "There were times in 2007, for example, when there were multiple offers and people paid millions over the asking price. Today, nobody wants to be the last monkey in the tree."
We want to know where you fit into retail's re-emergence…
That brings us to next week's Money Morning Question of the Week: What is your consumer-spending outlook for the rest of this year? What are you seeing? Compared with this time last year, has consumer-shopping activity picked up in your household or community? Have you adjusted your personal shopping habits? Why or why not?
Send your thoughts, questions and concerns to mailbag@moneymappress.com.
[Editor's Note: Is there a topic you want to see covered as a Question of the Week feature? Then let us know by e-mailing Money Morning at mailbag@moneymappress.com. Make sure to reference "question of the week suggestion" in the subject line.
We reserve the right to edit responses for length, grammar and clarity.
Thanks to everyone who took the time to participate – via e-mail or by posting their comments directly on the Money Morning Web site.]
News and Related Story Links:
- Bloomberg:
U.S. Factory Orders Rise 1.3%, Sales Jump Most in Two Years - The New York Times:
The Well-Off Are Spending Again – but Carefully - Reuters:
Wal-Mart beats Street but warns on outlook - MarketWatch:
Whole Foods profit leaps, outlook raised - Reuters:
Saks beats Street on reduced discounting - Money Morning:
Government Reports Show Consumer Spending Fueling Economic Recovery - Money Morning News Archive:
Question of the Week Feature
As for me I need all the restful sleep I can get, and that means not thinking about whether all my hard earned money is going to disappear. My grandfather taught me that all fortune is based on ownership of the earth. Farming, Real estate, Ranching, Owning a home or income properties…the earth. This is the salt that gives flavor to otherwise bland investing. I am a multi millionare now because I followed good advice…own the land, live on it, farm it, rent it…but first buy into it…and eventually you will return to it, where we all came from, our true mother earth. Bottom line if it doesn´t smell like fresh earth, it is a stinky investment.
thanks for this opportunity
Not spendling like I use to. Paid off all my debt except house and one of three cars. Put money into silver and gold for when we get hit with all this inflation due to our totally out of control spending by our government. This is not joke….We will pay for what these socialist idiots are doing to us as a country. Bigger the goverment…the smaller you are….and fewer freedoms. Just open your eyes. If I am right, and you are not prepared….you will be totally wiped out. If I'm wrong…I still got my…stuff.
Patrick – Our government will permit us to own the land on which we live and farm … for how much longer? … before it is nationalized and given to the "people"? … who are the rightful" owners of everything including our orchards, groves and vineyards, farms and fields … As we continue to plant and care for our land The biggest concern is loss of the individual's right to own property!!
I sold everything in '08, and I mean everything!. The houses, the toys, the investments, . . . and paid off all debt. I kept the paid-for '04 Honda Civic. Now I'm 33% in cash; USD, EUR, JPY, AUD, CAD, ZAR, 33% bonds (US, Brazil and South Africa), and 33% physical gold and silver. Deflation is the order of the day until debt levels are returned to sustainable levels. As rights and freedoms disappear, particularly property rights, real estate becomes a liability. Its permanent and stationary status makes it the ultimate conduit for tax collection. While the survivalists are stocking guns and canned foods in their sitting duck fortresses I can be afloat in the more remote regions of the world. A decent used sailboat doesn't cost much, especially when you consider other waterfront options, and allow me to be completely portable and energy independent on a moment's notice should it come to that. And the true upside is I don't have to cut the grass!
.Consumer spending is rising because millions of people have given up or are defaulting on their morgage!…the money has to go on themselves instead of the banks balance sheet. This in turn creates demand from manufacturers and seemingly creates jobs in the short term as billions are funnelled into shops tills……but alas, there is a timebomb ticking away in the morgage markets, millions are about to adjust to higher rates and compound the real esate disaster. This recovery and not expansion has been created by meddelers who reckon they are smarter than the markets, but like two years ago it will take a crisis to trigger the initial stages of the collapse…at first they will call it a correction, then a buying dip!……the next wave down will snap the patience of so called investors much faster causing a likely crash which will shock….rallies will be sharp and scary…..but it wont end until the last bulls are dead and washed up…welcome to reality
As long as Obama, Peloski, Reed and Clinton are in charge I am not ready to drink the kool aid and spend any money. Every time they say the economy is picking up they are either liars or just plain think the American tax payers are as crazy as they are.
I've only bought what I absolutely needed for my business, and letting everything else slide.