Consumer spending gains momentum, U.S. data indicate

By SHARON FRAJLICH
School of Communication
University of Miami

Every day, Claudia Aguirre, a University of Miami junior majoring in journalism and history, turns on her laptop to take notes, to do classwork or homework, to communicate with friends through Facebook, chatting or e-mail … and to shop.

With the click of a mouse, she can have a new pair of shoes shipped to her in just a few days without having to move more than an inch.

Shopping is a well-used remedy for various everyday ailments, such as heartache, boredom and loneliness. But during the past decade, particularly at the end of it, retail therapy was the cure for a nationwide recession.

According to data compiled by the Retail Indicators Branch of the U.S. Census Bureau, retail sales for the fourth quarter of 2010 were at $1,014,406 million , a 3.6 percent increase from the third quarter and a whole 8.1 percent increase from the amount made in the fourth quarter in 2009.

Meanwhile, estimates gathered by the U.S. Government Printing Office reveal an augmentation in the gross federal debt from 2000-10. Starting in the new millennium, the gross federal debt increased steadily at least $1million million each year, and had a vast jump in debt from about $5.6 million million in 2000 to an estimate of around $14.5 million million in 2010.

Source: U.S. Government Printing Office

Why has consumer spending gained momentum in a time of economic slowdown?

Mark Doms, chief economist of the U.S. Department of Commerce, stated in the Economics & Statistics Administration’s blog that the recent gains in the stock markets, such as the S&P 500 index was reported up by more than 20 percent last month from its lowest levels in September, have many families feeling wealthier.

Doms also believes consumer spending will continue its upward trend in 2011 due to the Middle Class Tax Relief Act of 2010, which cuts the employee payroll tax rate by two percent.

Source: U.S. Census Bureau

“Families may be feeling a bit more optimistic about their own finances and their outlooks.  Indeed, some measures of consumer sentiment have picked up.  As job gains pick up further, I wouldn’t be surprised if consumer sentiment picks up even more,” Doms reported in the ESA blog.

 

However, the increase in consumer spending does not necessarily mean an uplifting forecast for all retail stores. Figures recorded by the U.S. Census Bureau show a dramatic and steady growth in E-commerce in 2010.

Source: Consumer Expenditure Survey, U.S. Bureau of Labor Statistics, October, 2010

As defined by the Census, E-commerce includes “the sales of goods and services where an order is placed by the buyer or price and terms of sales are negotiated over an Internet, Extranet, Electronic Data Interchange network, electronic mail, or other online system. Payment may or may not be made online.”

According to ESA, sales in electronic shopping have climbed 28.3 percent since the start of the recession, while total retail sales only rose one percent during this same period. What this means is that sales elsewhere are doing worse off than all these Web stores, which at times offer convenience, discounts or even goods not found elsewhere.

While the average annual expenditures for entertainment and apparel amounted for only 13 percent of personal consumption in the U.S. in 2009, as shown above in the pie graph, that number was effectively predicted to grow throughout 2010 and this year.

Priorities for households do remain on common essentials, including shelter and food, yet figures gathered by the U.S. Census and the Bureau of Economic Analysis show nationwide growth in other sales which are in turn helping the U.S. economy whip back into shape of being the top worldwide economy.

“Consumer spending has moved into a period of healthy growth and we do think even if we don’t maintain the extremely strong fourth quarter pace consumer spending will grow solidly into 2011,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, in an article in Bloomberg News.

Source: U.S. Census Bureau

How does this all relate to Florida, particularly University of Miami students? For one, UM students have increased their shopping habits over the past couple years in correlation with the general population.

According to the store managers, popular retail stores for UM students American Apparel located in nearby Sunset Place, CocoWalk and Miami Beach, as well as LF for women in Miami Beach, have both seen a strong rise in sales in 2010 and these first few months of 2011, compared to those made in 2009.

“Our sales in 2009 for the holidays were booming, but in 2010 they surpassed our goals and sales in comparison to 2009,” said Amber Sreenan, store manager of American Apparel at Sunset Place.

“Although many people were on a budget, we found that the amount of people shopping versus the amount people purchased increased in 2010.”

Meanwhile, American Apparel Lincoln Road Store Manager Neyda Carasa foresees a downward trend in the company’s overall in-store sales compared to its online sales.

“Within the past two years, consumers’ technical knowledge has been growing exponentially,” Carasa said. “The Internet has revolutionized the retail industry making shopping online easier because you can find more items, sizes, send your purchase as a gift, just to name a few. Overall, I believe that the customer’s need to go into a store and physically purchase an item is in great decline.”

In contrast, LF Stores don’t offer the choice to purchase online, which could either hurt or profit business, said Alberto Bermeo, a manager at LF Miami.

“The Internet is just looking, you can’t touch or get the whole experience” Bermeo said. “What creates competition between retail stores is their customer service and the quality of their product, but between retail stores and online stores is convenience, price and accessibility of the product you’re looking for.”

In the same way, online stores have also changed shopping habits of UM students in a dramatic way, with laptops switched on in class, during breaks and at home to favorites including Top Shop, Free People, Asos and members-only Rue La La, all selling clothes, shoes and accessories for women not available in Miami, as well as Amazon, a go-to site from almost anything from books to electronics.

“Online shopping is just a lot more practical,” said Aguirre. “It saves me the time of having to go to the mall, I can just use my laptop at work or even use my Blackberry, not to mention how many more options I have online.”

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