Earlier this week, the Commerce Department reported that for the first time since last August, retail sales fell on a monthly basis, slipping 0.5 percent in May. The slowdown in spending was generally attributed to higher oil prices and interest rates.
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But there could be something else at work. According to a recently released global survey by ACNielsen, the United States leads the world in the percentage of consumers who say they have "no spare cash" to spend. In other words, households may not be spending more because they don't have much money left after paying their bills.
The ACNielsen consumer confidence study found that 28 percent of Americans say they are living paycheck to paycheck, while the world average is closer to 13 percent. The only other countries where more than 20 percent of people say they have no spending money (after bills are paid) are Portugal, Brazil, and Chile. By comparison, only 5 percent of people in Thailand say they're tapped out.
Of course, for a lot of Americans, this is old news. What's new is a greater sense of austerity among Americans. A similar survey by ACNielsen in October of 2004, for example, asked people how they spent spare cash after meeting basic living expenses. Back then, 29 percent said they used the money for entertainment, and 21 percent said they typically bought new clothes. Today, those figures are down to 21 percent and 15 percent, respectively.
This would seem to explain why sales at clothing stores fell 0.8 percent in May, slightly greater than the overall retail sales slump. It would also help explain the 0.3 percent decline in spending at restaurants and bars last month.
"On a daily basis, Americans are exposed to two competing messages: 'A strong economy is dependent upon strong consumer spending,' and 'Your consumer debt levels are too high,' " said Tom Markert, ACNielsen's chief marketing officer. "Historically, the first message has driven consumer behavior more so than the second one. Lately, it seems, the second message is starting to get some traction."
Indeed, 37 percent of Americans surveyed said their first priority after paying off monthly bills was to pay down credit card debt. That's up from 33 percent last year.
