Lots of stuff, fewer buyers

The dominant theme during our short stay at the seaside village? Gifts shops and stores filled with tons of stuff, but not nearly enough customers. The sales pace of everything appeared to have slowed/declined: hotel occupancy was down, restaurant reservations were down, and in gift shops the popular trend appeared to 'strolling and browsing.' At a local brunch/coffee house, my fiancee and I sampled before site seeing, we noticed that we were the only people in the shop. I thought that odd, but again, it was a Monday morning; I noticed the same pattern on Wednesday.

"It's been like this since the credit crisis hit," the coffee house owner said. "Just slow." At a visit to Ocean City, Maryland earlier in this summer, the conditions were similar: just slow.

That the U.S. economy, which appears to be recovering (finally), is undergoing structural changes is well-known. But if the current trend of 'non-consumption' continues, I don't think business executives, nor economists, have fully-grasped the magnitude of the change. If the 'frugal consumer' era endures, not just shops and niche segments, but sectors could take major hits, if they survive. Clearly, consumer retail, apparel, and restaurants will be hit hard.

The impact on investors? The U.S. economy will have to identify/create new sectors of commercial activity to make-up for the GDP lost in the frugal consumer era. Otherwise, it's hard to make a case for U.S. GDP returning to its output potential anytime soon.

Financial Editor Joseph Lazzaro is based in New York.