Economy

Year-Over-Year Spending Up 7% in March

by Dennis Jacobe, Chief Economist

Biggest gains in the East and Midwest, and among older, lower-, and middle-income Americans

PRINCETON, NJ -- An early Easter, a surging stock market, better weather, and weak year-ago comparables combined in March to drive Americans' self-reported spending up 7% compared with March 2009. While this is welcome news for the nation's retailers and the economy as a whole, spending remains in the "new normal" range ($59-$67) established last year.

U.S. Consumer Spending, January 2008-March 2010

Biggest Year-Over-Year Gains

"Even taking the early Easter and improved weather into account, March spending represents a nice improvement from a year ago."

Spending increased 24% in the East and 21% in the Midwest over last March as the economy and employment in these two regions have shown marked improvement over the past year. The March stock market surge may have encouraged spending among older Americans, as those aged 50 to 64 (up 22%) and those 65 and older (up 12%) increased their spending. Spending among middle- and lower-income Americans (those making less than $90,000 a year) was 12% above year-ago levels.

Year-Over-Year Consumer Spending, March 2009-March 2010, Among Various Demographic Groups

Spending "New Normal" Dominates

The year-over-year spending increase for March that Gallup finds is consistent with the 9.1% sales gains Thomson Reuters reported and the 10% sales gains the International Council of Shopping Centers estimated for the month. Even taking the early Easter and improved weather into account, March spending represents a nice improvement from a year ago.

However, a closer look at the demographic groups responsible for the increased March spending provides reason for caution and at least partly explains the seeming contradiction between increased consumer spending and near-double-digit unemployment as well as declining use of consumer credit.

The East and Midwest benefit from a much-improved jobs picture in manufacturing and finance compared with March of last year, when the stock market hit bottom, layoffs were soaring, and every business was cutting to the bone. But such year-over-year gains may not continue in future months. Also, March year-over-year spending actually declined in the West.

Older Americans may not be relying as much on consumer credit as other consumers are, and they may not be as worried about unemployment, so their improved spending levels may continue. However, the same could be said about upper-income consumers, whose self-reported spending was down 7% in March.

The lack of increased spending by upper-income Americans could be related to a wide range of concerns ranging from reduced home values and past investment losses to today's nonexistent rates of return on safe investments and fears of higher taxes. Regardless, this lack of spending by those who have the resources to do so is a clear reflection of the spending "new normal."

Upper-Income U.S. Consumer Spending, January 2008-March 2010

In sum, there is reason for optimism that consumer spending in the U.S. is beginning to recover modestly from its levels at the depths of the recession. However, it seems far too early to assume that the spending new normal that has dominated over the past 15 months is no longer in effect.

Review and export the complete daily trends on these measures: Economic Indexes; Consumer Spending; Economic Outlook; Economic Conditions; Job Market; U.S. Workforce

Survey Methods

For Gallup Daily tracking, Gallup interviews approximately 1,000 national adults, aged 18 and older, each day. The Gallup consumer spending results are based on random half-samples of approximately 500 national adults, aged 18 and older, each day. Results for March are based on telephone interviews with more than 14,000 adults. For these results, one can say with 95% confidence that the maximum margin of sampling error is ±1 percentage point. Results for the various breakouts reported here are based on interviews with more than 1,000 respondents, with a maximum margin of error of ±3 percentage points.

Interviews are conducted with respondents on land-line telephones and cellular phones.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

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