A 'Depression Era' mentality takes hold of consumers


The Associated Press reports that a "Depression Era" mentality is taking hold among consumers. This matters to the overall economy since 70% of Gross Domestic Product (GDP) growth depends on consumer spending. Maybe this is good news because it will make people care more about spiritual matters, and less about material ones.

AP bolsters its consumer mentality shift with excerpts from a Nielsen survey that interviewed 50,000 consumers by e-mail during the first week of June. The survey found that

  • 63% of consumers are cutting spending due to rising gas prices, up 18 percentage points from a year ago;
  • 78% of consumers are combining shopping trips;
  • 52% are eating out less often;
  • Consumers are cutting more coupons;
  • They do more of their shopping at super centers; and
  • They buy less expensive brands.

Should it come as a surprise then that the biggest discounter on the planet, Wal-Mart Stores Inc. (NYSE: WMT) stock is up 21% in the last 52 weeks? That's not all. Costco Wholesale (NYSE: COST) shares have risen 16% and TJX (NYSE: TJX), a discount clothing retailer, has enjoyed a 17% boost to its stock price.

The interesting question to me is whether consumers will come roaring back to borrowing and spending should the economy recover. Or will this economic downturn be so severe that it will permanently change American attitudes towards material goods? If so, will Americans become more spiritual?

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Last updated: February 10, 2012: 03:17 AM

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