Wealthier Americans continue to economize

Gallup’s measure of middle- and lower-income Americans showed an increase in May of 12 percent over April, from $52 to $58 per day. However, year-over-year results for the first two weeks of May show a decline of 48 percent. This is a larger decline as compared with year-over-year results for March and April. These numbers may also have been affected by last year’s tax rebates.

The government’s economic stimulus plan will likely have a modest impact on consumer spending compared to last year’s tax rebates. In addition, the $250 payments to be sent to those receiving Social Security and supplemental security payments and veterans with disability and pension income, although totaling $14.2 billion, will also likely have a modest impact. These checks have only just begun arriving in recipients’ mailboxes.

Aside from issues of stimulus, upper-income Americans continue to pull back on their spending. This may be a consequence of the sharp decline in home equity and the stock market combined with the very low returns on guaranteed investments like bank CDs. These factors dovetail with a high level of economic uncertainty to make saving more fashionable that spending now. Downscale retailers, the beneficiaries of such a mindset, continue to do well in the current economic environment.