Family spending is slowing in response to current economic conditions.
Fears of a double recession, inspired by steep market selloffs and the European debt crisis, have led to cutbacks in family spending across the county.
More than 40 percent of Main Street Americans believe the nation is headed for a double recession, according to the results of a September survey by Millionaire Corner. Worry is highest for households headed by adults in their 40s. Among this age group, 46 percent believe the economy is headed for a retraction.
Few investors – only 26 percent – feel that they are better off now compared to a year ago, and only 32 percent believe they will be better off one year from now.
The negative sentiment is prompting families to “button up their wallets,” according to Bankrate. The website’s September Financial Security Index indicates that 40 percent of American households plan to reduce family spending in response to recent economic events and concerns about a double recession. Investors were unnerved by slow GPD growth, plunging stock markets and reports that the European banking system was on the verge of collapse.
“This type of widespread cutback in consumer spending, if sustained for any length of time, is how recessions are born,” said Greg McBride senior financial analyst at Bankrate.
Data released by the Commerce Department today reveals that consumer spending slowed in August, while income declined slightly. Consumers spending increased by 0.2 percent in the month of August, a slower rate than the 0.7 percent increase for July. Declining payrolls in both the manufacturing and service sectors contributed to the decrease in wages.
More than half the 1,360 investors interviewed in a June survey by Millionaire Corner said they plan to reduce family spending in response to the economic situation. Investors with a net worth below $100,000 were the most determined to cut spending with nearly 70 percent planning to slow down on purchases. More than 48 percent of participants planned to increase their saving, and the share goes up to 56 percent for investors in their 40s.
Today’s Commerce Department report indicates that declining incomes are limiting the ability of households to set aside money. The figures show that savings rates declined by 0.2 percent in August, and accounted for 4.5 percent of disposable income for the month.