Will Shaken American Consumers Change Habits?
Powell, Eileen Alt, THE JOURNAL RECORD
NEW YORK -- A lot has happened in the past year to shake consumer confidence: The economy fell into recession, albeit a mild one, for the first time in a decade, and a lot of people lost their jobs. Terrorists obliterated the World Trade Center in New York. Enron collapsed, taking with it millions of dollars in employees' retirement savings and shareholders' investments.
Taken together, those events go a long way toward explaining why several recent surveys found Americans very jittery.
A poll by the Consumer Federation of America, for example, found consumers more interested in saving and debt repayment and less interested in spending.
The trend was especially strong among those in the 25-34 age group, said the federation's executive director, Stephen Brobeck.
"All they knew was rising affluence," he said. "Then came the dot- com bust, then Sept. 11. It was sobering."
Meanwhile, a survey by Charles Schwab & Co. found that a third of investors were less confident than a year ago about choosing investments they thought would perform well over time.
"In an up market, every one of us thought of ourselves as broker of the year," said Carrie Schwab Pomerantz, founder of Schwab's "Women Investing Now" program. "Now we're seeing more clients asking for help."
It remains unclear, however, whether real changes are occurring in consumer behavior that could affect the U.S. economy and how lasting they might be.
"What consumers say they are planning to do and what they actually do are quite different things," said Sung Won Sohn, chief economist for Wells Fargo & Co. "I might add that it's the same for businesses. They say, `I won't spend money on capital goods.' Next thing you know, they do."
For the moment, consumers are still spending because "they're feeling better about job prospects as the economy improves and concerns about terrorism diminish," Sohn said. …