Consumer Spending Drops 6 Times in 7 Months

It’s no secret that retailers saw abysmal Holiday 2008 numbers. Low consumer spending expectations were met by even lower actual returns — in many cases, 2008 marked the worst holiday spending season in decades. According to a Fox Business report, real consumer spending fell 1 percent in December — or 0.5 percent when adjusted for inflation — marking the sixth time spending dropped in seven months.

The Commerce Department says consumers chose to save “what they gained from falling energy prices.” Not a surprising notion in an economy where job security is almost nonexistent. In fact, the personal savings rate rose to 3.6 percent in December because spending is falling faster than incomes are, a hint at the new American economic consciousness.

However, economists agree that consumer spending is the most effective way to begin repairing a recession’s damage to the economy. So it seems that as a country, we’re stuck in a spending conundrum. Do we save to preserve ourselves or spend to preserve the economy?

With President Obama’s new bailout plan on the horizon, will Americans spend what they’re getting back in tax cuts, or will scared consumers continue to save or apply the rebate to practical costs, like monthly bills? Only time will tell.

Have your spending habits changed in the new economy? Are you saving more for a rainy day or doing your part to spark the economy?

Tags: consumer saving, consumer spending, consumer spending rate

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