Since the economy started doing so poorly, citizens like you and I started saving instead of spending. The actual numbers are that people were saving about 1% of disposable income and that jumped to 5%. Since the economy is returning it has slid to about 3% of income. This economic situation has made people aware of the need for savings. The important question is:
How many of you will only make this a goal for a short time until you feel comfortable with your job situation or the value of your house starts to climb back up?
Paul Flatters and Michael Willmott looked at the above question in “Understanding the Post Recession Consumer”. They conclude that key trends are being accelerated by this recession:
- Consumers demand more simplicity. For example they won’t spend on expensive cars if something simpler will fill their needs.
- Consumers want better corporate ethics. People are upset about the excessive compensation structures at the executive level and seeing no increase in their own salary.
- Consumers are looking for ways to economize in their daily lives i.e. Reduce spending.
- Consumer loyalty is definitely being tested as consumers look for the cheapest deal. For example, we spoke about name brand shopping vs. store brand shopping in a previous post.
Interesting enough it has impacted a few other areas as well as other trends are slowing:
- Green consumption and charitable giving has slowed. For the time being consumers are not spending more on green products, but this is probably not a long term trend. Once the economy improves concern about the environment will likely return.
- There has been a decline in respect for authority. Government regulators missed most of the scandals (Enron, AIG, the banking Industry) and other Wall Street excesses, respect for the government and authority in general has diminished. Not to mention all the representatives and senators filling their own pockets while not seeming to help Americans find jobs.
- Ethical consumption. Right now consumers are looking for the best deal. The organic, animal friendly, fair trade products are not moving off the shelves as quickly as their cheaper consumerables.
- X-factors have slowed, meaning people are spending less on eco or extreme vacations. There’s just less money to spend for these experiences. Even average vacations have been cut back. The authors expect extreme-experience vacations to be altered for the long time.
I feel for the time being we should save all we can and make wise spending decisions if we follow this advice we will come out of this just fine.
Photo Credit: thms.nl
Have you changed your spending or saving habits due to the recession?