Consumer spending continues to fall

02.03.09
By Timothy Jones

Americans were in no mood to live it up over the holidays, new Commerce Department figures from December suggest.

As was largely expected, consumer spending fell that month by 1 percent - the sixth consecutive month in which this figure dropped.

The numbers may come as little surprise, after retailers had broadly reported their worst holiday sales in many years and shoppers said they planned to cut back.

"The report shows that consumers are in a mood to rebuild their savings but not to go out and spend," Wachovia economist Mark Vitner told CNN Money.

"Generally that's a good thing, but not when everyone does it at the same time," he added.

Experts suggest job worries are at the heart of many Americans' reluctance to spend. Meanwhile, some people are bogged down with large mortgage payments or significant credit card debt.

Consumers may be cutting back or putting off a variety of purchases, but some items and services may be seen as less expandable than others, according to a new National Retail Foundation survey.

The findings reveal that even in challenging financial times, 81 percent of people would not cut back on internet services, while 64 percent cannot imagine life without their cell phone.

Cable television, discount apparel, haircuts, fast food and new shoes were also mentioned by consumers as "untouchable" items when it came to changing their habits.

Meanwhile, the most commonly cited areas for scaling back included luxury handbags, satellite radio, specialty clothing, expensive cosmetics, maid service and facials.

It seems that more and more people are discovering that they may not have had enough to pay for such luxuries in the first place.

"We're in a different time than we've been in any of our living memories," consumer advocate Gerri Detweiler told Smart Money. "The level of debt that consumers owe is much higher than it's been in the past."

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Consumers are saving instead of spending