Wednesday, October 6, 2010

Middle Class Spending Slows

The Wall Street Journal reports that the American middle class has slammed the brakes on spending:
Middle-class Americans made their deepest spending cuts in more than two decades, slashing spending on such discretionary items as restaurant meals and alcohol during the recession.

Households in the middle fifth of the population sliced their average annual spending to $41,150 in 2009, the Labor Department said Tuesday in its annual spending breakdown. That was down 3.1% from 2007 and 3.5% from 2008, the steepest one-year drop since records began in 1984. The drop came even as those households' after-tax income remained relatively stable over the two years, at an average $45,199.
With spending down, it's no wonder that there have been a lot of job losses, but then we learn that the poor are the hardest hit:
Meanwhile, the poorest Americans spent more as prices for necessities like food and rental housing climbed. Spending rose 5.6% from 2007 to 2009 for the poorest fifth of consumers, the most of any other income group, despite a 5.5% drop in after-tax income to an average $9,956 a household. In some cases, elderly people and others with low incomes dipped into savings or relied on credit to get by.

1 comment:

grandmavida said...

Is it any wonder why the middle class has put the brakes on spending? I know my health insurance went up by $300 per month since our leaders passed health care. And I am a very healthy person! Of course income didn't go up, so there is less discretionary spending. As a small business owner, I am also curtailing any future inventory purchasing because I see the sales in my store going down as everyone else has to cut back, too.