•Americans Plan to Limit Spending Amid Concern About Economy, Survey Shows

Discussion in 'Economics' started by ByLoSellHi, Sep 16, 2009.

  1. Americans Plan to Limit Household Spending, Survey Shows
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    By Mike Dorning

    Sept. 17 (Bloomberg) --
    Americans say they plan to maintain their spending patterns as they are uncertain about the direction of the economy over the next six months.

    Only 8 percent of U.S. adults plan to increase household spending, almost one-third will spend less, and 58 percent expect to “stay the course,” according to a Bloomberg News poll. More than 3 in 4 said they cut spending in the past year.

    Respondents were divided over whether the economy will get better or stay the same in the next six months; only 1 in 6 said things will get worse. More than 40 percent of those surveyed say they feel less financially secure than they did when President Barack Obama took office in January, outnumbering 35 percent who say they feel more secure.

    “People I never thought would lose their jobs have lost their jobs,” said Angela Payton, 42, a university publications editor in Florence, South Carolina. She kept her children out of summer camp, stopped buying organic milk and plans to curtail the party for her daughter’s 6th birthday in November.

    In the poll, conducted Sept. 10-14, 40 percent of those questioned say they have experienced one or more problems from the banking crisis. In the most-often cited repercussions, 27 percent say their credit-card interest rates have risen dramatically and 15 percent report that they couldn’t get a home-equity, car, or other kind of consumer loan.

    Americans are divided about Obama’s handling of the financial industry’s crisis -- 45 percent approve of the president’s performance and 44 percent disapprove.

    Wall Street faces a more hostile public as Obama presses for new financial regulations. Half of the Americans surveyed have an unfavorable view of Wall Street, versus 31 percent with favorable views.

    No Bonuses

    “Everybody is angry. We all know if we screwed up as badly as the Wall Street managers, we would not be paid, we would be fired and we would not get bonuses,” said Virginia Clifford, 54, a lawyer in Olympia, Washington. “A lot of people are waiting to see if Obama has the guts to reform Wall Street.”

    Three out of four Americans support government-imposed limits on executive pay at companies that haven’t repaid government bailout money, the poll shows.

    While banks and financial companies are lobbying to kill Obama’s proposal to establish a Consumer Financial Protection Agency, 56 percent of Americans support the idea, with 31 percent of the poll respondents opposed.

    “If somebody is not looking out for consumers, who cares whether something is unhealthy or unwise?” said Tony Dumas, 39, a graduate student at the University of California in Davis. “Capitalism run amok is why we’re in the mess we’re in.”

    Cutting Back

    Underscoring consumers’ austere attitudes, 77 percent of respondents say they have cut back on spending during the past year, 59 percent say they have made a bigger effort to pay off debts and 48 percent have put more money aside as savings.

    Because consumer spending accounted for 70 percent of the economy since 2001, the speed and strength of a recovery may depend on how quickly Americans loosen their purse strings.

    Retail sales in August surged 2.7 percent, the largest monthly jump in three years, fueled in part by the government’s “cash-for-clunkers” auto-purchase program. August sales also probably benefited from sales-tax holidays that some areas offered back-to-school shoppers and may not signal a turning point, said Louis Crandall, chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based research firm.

    “There are lots of reasons to expect consumer spending to remain soft,” Crandall said, citing rising unemployment and drops in home values and household wealth.

    Savings Suffer

    More than 4 of 10 Americans surveyed say their retirement savings have suffered in the past year, 40 percent say home values have dropped, and 27 percent say workers in their households have less job security.

    By 62-34 percent, Americans say high unemployment is a greater danger than inflation over the next two years.

    The Federal Reserve, which Obama would like to give preeminent regulatory authority over the financial system, is viewed favorably by 44 percent of respondents against 33 percent with unfavorable opinions.

    Democrats including House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd have questioned Obama’s plan to give the Fed the primary authority to regulate systemic risks. They have backed Federal Deposit Insurance Corp. chief Sheila Bair’s preference for a council of regulators to monitor risks.

    Consumers Skeptical

    Americans are skeptical about the prospects for two industries that have received large-scale government support. Fifty-three percent say they’re pessimistic about the banking industry, versus 41 percent who are optimistic. When asked about the automobile industry, 53 percent are pessimistic versus 42 percent who are optimistic.

    The poll is based on interviews with 1,004 U.S. adults 18 and older. Interviewers contacted households with randomly selected landline and cell-phone numbers. Percentages based on the full sample may have a maximum margin of error of plus-or- minus 3 percentage points.

    To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net.
    Last Updated: September 16, 2009 18:00 EDT