Many consumers lack hardy 'buying power'

Many consumers lack hardy 'buying power'

Postby DDEATH » Sun Mar 25, 2012 10:45 am

Many consumers lack hardy 'buying power'
Meg Handley, U.S. News & World Report

March 23, 2012
Just half of Americans are confident gains in employment and other important economic indicators are sustainable, a new survey from found, while 48 percent aren't so sure the economy has finally found steady ground.

Almost a quarter of Americans are "not at all confident" the recovery will continue.

"What this shows is that there is a fair amount of skepticism on the part of consumers," says Greg McBride, senior financial analyst for

Americans haven't seen any real increases in their paychecks, McBride says, and even if they have enjoyed a few wages bumps here and there, the increases haven't kept up with rising food and energy costs.

"For a lot of people, their income just doesn't have the buying power that it did two or three years ago," he adds. "Not only does that make it difficult to make financial headway on things like paying down debt and boosting savings, but it's hard to feel like you're getting ahead when your paycheck doesn't go as far as it used to."

The big concern is that underlying skepticism could cause Americans to pull back on spending, which could be devastating to the U.S. economy, 70 percent of which is fueled by consumer spending.

"The concern is that it could become a self-fulfilling prophecy," McBride says. "People that are holding back on spending because they're uncertain about the future essentially become a head wind for the economic recovery itself."

While the past several months have seen some good news on the economic front — improving jobs numbers, a stronger stock market, better home sales figures — it's not all that unexpected that Americans feel a little bit wary about jumping on the economic-recovery bandwagon, at least at this point, McBride says.

The past couple of years have seen nascent recoveries all but disintegrate under the pressure of higher oil and gas prices, not to mention political turmoil at home and abroad.

"Look at the pattern of the past two years," McBride says. "Things started out great — the economy was looking good, the stock market was doing well in the first third of the year — and then we hit a rough patch in the middle third of the year, so I think a lot of people are guarded about the same pattern unfolding again."

Surging gas prices and election-year antics haven't severely crimped Americans' spending habits yet, but recent consumer confidence numbers showed some signs of strain.

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