Spending for Food, Gasoline, and Other Consumables During the Recession

We’re half a year now into the recession.  Consumers with the wherewithal to weather the storm have not cut back on spending for food, gasoline, and other consumables, neither have the wretched poor.  But the vast numbers of people in the middle - feeling the full impact of the recession - are exercising restraints on spending.  

Overall consumer restraints on spending for food, gasoline, clothing, and medicine tightened in November with the start of the recession, and became tighter as the recession deepened.  The Shapiro Consumable Spending Index, which tracks consumable spending behavior for food, clothing, gasoline, and medical expenses, plunged to a low of 73 in April from 85 in November 2007, at the onset of the recession.

Asked directly in April, seven in ten consumers (70%) believe the nation is in a recession; only 22% do not feel the nation is in a recession and the balance do not voice an opinion.

Looking at a sample of 2,902 consumers surveyed over the past six months of recession, 17% impose across-the-board restraints on spending for food, clothing, gasoline, and medical expenses.   

At the other extreme, one in five (20%) did not cut back on any of the four categories of consumables covered in the survey. 

Almost a third (29%) are cutting back on one category of consumables, and 34% are cutting back on two or three categories.

Cutting back on spending is related strongly to feelings that prices have increased in the past month, fears of job difficulties ahead, and consumers feeling they can not afford to sustain their current rate of spending.

The percent of consumers who report prices have increased in the past month ranges from a low of 58% among those who are not cutting spending on any of the four consumables covered in the survey to a high of 84% among those who are restraining spending on all four products covered in the survey [food, clothing, gasoline, and medical services].

Fear of employment difficulties in the coming months is voiced by only 18% of those who are not cutting back on spending for any of the four surveyed products; this fear climbs to a high of 74% among those who have clamped spending restraints on all four surveyed products.

The Shapiro Consumer Affordability Index (CAI), which tracks whether consumers feel they can afford to sustain their current level of spending, is also strongly related to cutting back on spending.  All respondents interviewed during the past six recessionary months have a CAI of 88.  By contrast, the fortunate 20% who have not cut back on spending enjoy a CAI of 117. 

Those who have clamped restraints on all categories of consumable products covered in the survey have a CAI of 67.

Spending restraint on consumables is also tied tightly to the financial situation of consumers and their demography.

Financial Situation

Annual family income ranges from a high of $80,100, among consumers who are not cutting spending on any of the four surveyed products to a low of $37,200 among those cutting back on all four surveyed products.

The percent of consumers owning stock ranges down from 66%  among those not cutting spending on any of the four surveyed products to a low of 27% among those cutting spending on all four surveyed products. 

The Shapiro Index tracking consumers’ feeling of affluence declines from a high of 134 – for those not cutting back on spending for any of the four surveyed products – to a low of 53 among those cutting spending on all four surveyed products.

Demographic Characteristics

Consumers who are not cutting back on any of the four surveyed products are more likely than those who are cutting back on one or more products to be white, male, college graduates, and age 50 years and older.

Conversely, those cutting back on all four surveyed products are more likely to be Hispanic, Black, female, under 50 years of age, and have less than a college education.

Products

The effect of the current hard times on spending differs by product.  Consumers are spending most freely- i.e. imposing the lowest restraints on medical and clothing expenditures.  Gasoline spending is subject to the greatest restraint in spending.

Concentration of Active Shoppers

Active shoppers are not evenly dispersed in the population but are clustered.  The level of spending for consumables is subject to what happens to the financial situation of the most affluent sector of the population – the 20% of consumers who are not cutting back on any of the four surveyed products.

Future spending for gasoline or for products that reduce the amount of gasoline purchased – such as buying low mileage cars – is also vulnerable to any deterioration in the financial situation of affluent consumers.  Over half (54%) of all consumers who are spending freely for gasoline are concentrated in the 20% of the population whose spending is least affected by the recession.

At the other extreme, spending for medical care is least vulnerable to what happens to the financial situation of the affluent sector of the population.  Only 28% of all who are spending for medical care is concentrated in the 20% of all consumers who are spending without restraints.

                                                View the Table 

Significance

Stressed by rising food and gasoline prices and static or falling incomes, large sectors of the consumer population are changing what they buy and how they shop.  These observable changes in behavior signify that other profound but less visible and longer-lasting changes are in progress in how people in the U.S.A. live.

For example, the efforts of consumers to save on gasoline are affecting the shape of urban places.  People are choosing to live closer to where they work, shop, and spend their time. (See $4 Gallon Gasoline that is now posted on whospends.com)

Click on CONTACT US to request more detailed tabulations of the target markets for the four types of consumable major products covered in the survey.  They will come to you via e-mail at no charge.

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