The changing face of consumer spending

04.30.09
By Sarah Beldo

If you are like many Americans, the current recession has significantly changed how you spend and save money.

Surveys show more people are cutting back on making unnecessary purchases and seeking out the best deals on everything from groceries to vacations. But how long will this new era of thrift last?

New figures from the Commerce Department reveal that consumer spending declined by 0.2 percent during March, which was a more significant decrease than analysts had expected. It was also the first fall after two consecutive months of increase.

Americans' evolving attitudes toward spending are also revealed by the latest Visa figures for the final three months of 2008. The credit card processing company reported that for the first time ever, the debit payment volume exceeded credit payment volume.

The reason? Experts say people recognize they cannot continue adding to their credit card debt, but still need to cover basic necessities.

"People are delinquent on their credit cards, so they're more inclined to use debit for nondiscretionary purchases," James Friedman of Susquehanna Financial Group told Bloomberg.

The Commerce Department data also shows that income growth fell during March by 0.3 percent, as widespread layoffs continued to sweep the country. Perhaps responding to employment fears, the savings rate rose to 4.2 percent, suggesting more households were putting money into rainy day funds.

However, the question still remains - do these trends reflect a temporary reaction in the face of the recession or has consumer behavior changed for good?

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More people are cutting back on making unnecessary purchases.