Consumer Spending is Rising Big Increase in Luxury Spending

Most Americans consumers had cut down on spending during recession, but there are clear signs that people are coming out of their shell now and are willing to spend more.

There are many signs of economic recovery as the job market is picking up, industrial output is increasing and retail sales are going up. And the icing on the cake is that consumers are no longer restricting their spending to necessities like food and medical expenses. They are spending on clothes, jewelry, holidays and cars.

Increase in luxury spending

Various businesses – hotels, jewelry stores, yacht rental firms etc – have started doing well again. This shows that luxury goods and services, which had been hit badly during the recession, have started picking up again. People seem to be tired of pinching pennies and wish to relax and enjoy now. Personal consumption expenditure, Commerce Department’s variable for measuring retail sales, went up by 0.3% in February while the personal savings rate has gone down.

Various retailers have started showing better results than they expected and the increase in sales is predicted to be at least around 10% as compared to last year. This means that retailers are no longer restricting their inventory and are giving orders for more goods. They are also doing all they can to attract new customers by providing no-interest loans or reducing their prices.

The figures also show that wealthy customers are getting back to their high spending habits. They have gained from debt reductions, year-end bonuses, and better gains from their stock investments, and they have a lot of spending power right now. Due to this, up market businesses have been among the first to benefit from the recovery.

Cautious optimism

However, recession has left some scars and most people are now wary of living beyond their means. They are reducing their debt, as they do not want to face the risk of a personal financial crisis again. In spite of the rise in spending by consumers, it has not reached pre-recession levels yet. The recovery is expected to be a slow process and it will take a lot of time to get consumer confidence back to its original level.

Businesses are also scared about the possibility of sales going down again once the latent demand that was getting built up during the recession is exhausted. But once the job market picks up, there would be fresh demand in the system and it would make the economic recovery sustainable.

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