According to a self-reported Gallup poll, upper-income Americans’ discretionary spending averaged $94 per day during the first 15 days of May, which is a drop of 15 percent compared with April and 48 percent from the same period a year ago.
This represents the sharpest year-over-year decline so far this year. Unless there is a change, upscale retailers and sellers of big-ticket items will continue to suffer.
Upper-income Americans, or those who earn $90,000 or more per year, brought May to the lowest average daily spending rate of the year. It is worth mentioning that last year’s numbers were inflated due to relatively large tax rebates, although such rebates were phased out for many high-earning individuals.
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.