Americans are buying less jewelry and fewer homes than they did a year ago. Personal computers are gathering dust on warehouse shelves. Sales of airplane tickets and minivans have flattened in recent weeks.
Just as the country has entered the most important shopping season of the year, consumers are holding back, reacting to a lower stock market and higher energy costs and interest rates. At the moment, the prospects for next year do not seem much better. The enthusiasm of American consumers for spending and borrowing, which has sustained the economy whenever it seemed to falter over the past decade, now appears to be at its lowest point in perhaps five years, economists say.
Of course, those five years have been among the strongest in history, analysts say, and the economy continues to grow today at a rate that would have seemed healthy at many other times during the past three decades. The shift has happened more quickly than most analysts expected, however, and it has been particularly evident in the past week. For the second consecutive month, consumers said they were less confident about the future of the economy, the Conference Board reported Tuesday. The number of workers filing new claims for unemployment benefits rose 5 percent in just one week, the government said Thursday. The Standard & Poor's 500-stock index hit a 52-week low last week, as dNASDAQ composite index, which has lost almost half of its value since March. Consumer debt has reached its highest level in at least 20 years, according to one measure.
All of this comes on top of the third quarter, when economic growth was less than half that of the prior three months.
At the heart of the deterioration is a newfound hesitance among many consumers. That skittishness is of particular concern because the other pillar of the 10-year economic expansion — business investment in new plants and equipment — has also weakened. Economists say a moderation of consumer spending had to happen at some point because higher costs have left many people with less disposable income.
Since mid-1999, gas prices have jumped almost 50 percent, health care costs are up and the Federal Reserve has raised interest rates six times.
For much of the last 18 months, the added expenses failed to curtail shopping, as consumers took out more debt and dipped into their savings. In the third quarter, the average minimum monthly payment that Americans owed on their debt reached its highest level since 1987. Americans also spent more money than they earned during the quarter, something that never occurred in the 1980s or 1990s, according to Economy.com, a consulting firm in West Chester, Pa. Now people seem to be reacting.