ECONOMY - We're All Frugal Now

CNN.com recently reported on America's transition from conspicuous consumption to frugality. The article by Lisa Respers France, included insight from consumer advocate Clark Howard. Howard pointed out that

...he has noticed from listeners to his popular call-in radio show that even those who really don't need to cut back are still choosing to do so. That didn't happen, he said, during the last deep recession from 1979 to 1982.

This statement falls in line with research that we have done tracking young adult consumers' responses to the economy starting in December 2007 via our Online Panel of Thought Leaders (made up of young adults ages 21-35 across the country).

In January 2008, we reported that while just over half had been personally affected by the economy, even those not suffering were still reducing spending (press release included below). Check out this article from USAToday in April 2008, quoting Anna D'Agrosa on teens becoming frugal.

We will continue to monitor our panel for insight on this topic, specifically looking for the first signs of a turnaround.

FEELING THE PINCH
January 25, 2008

We recently surveyed 300 young adults from our online panel of thought leaders about the economy, its impact on their spending and lifestyle and their predictions on who will be the next president of the United States.

Just over half have been personally impacted by the economic downturn but even those not suffering are still reducing their spending and buying more cautiously than they have in the past.

The big losers have been the non-essential categories e.g. clothing, restaurants and bars, cabs, new car dealerships, entertainment. The winners would appear to be grocery stores, fast food restaurants with dollar meals, public transportation and perhaps liquor stores for more at home entertaining.

“I’m feeling cautious, leery, overexposed, mildly depressed”

Over half of our panel said they have been personally affected by the downturn in the economy. Many have lost faith in the future and feel the country is in a downward spiral. The impact is also being experienced by their families and friends.

“I see the effect of the economy on my father’s dry cleaning business. The cost of his most important supplies like petroleum, the electricity needed for processing and even something simple like hangers has risen dramatically. Meanwhile, customers are not spending as feely as they once were.”

What’s bringing it home for most is the real estate market (too many houses for sale/problem paying their mortgages), the stock market decline (portfolios and 401K plans losing value), and gas prices (along with the price of everything else going up while their wages are stagnant). Many also mentioned limited job opportunities and those still in college were concerned about finding positions once they graduate.

“Fewer splurge purchases. Basically, I’m only buying essentials, not shopping for fun.”

Almost two-thirds have made changes in their spending habits and are more careful about what they buy. Clothes have taken a big hit (“only buy on sale”) as has eating out and most other frivolous purchases. Most are also watching how much they drive and looking to car pool and take public transportation when available.

Conversely, more are cooking and entertaining at home e.g. renting a movie vs. going to the movies with friends. Many also noted that they were saving lots of money by brown-bagging their lunches.

Those less affected by the economic situation are still changing their spending habits, with many citing cut-backs on credit card purchases and paying off their balances each month. They were also more likely to buy generic brands as opposed to name brands and are cutting back on restaurant meals in favor of gourmet grocery shopping.

They expect the downturn to last at least 1-2 years

About one third expect the economy to recover in 1-2 years with another third expecting it to turn around in the next few months or by the elections latest.

Almost 1 in 5 believe this is just the tip of the iceberg and don’t expect a recovery for 5 to 10 years.

They’re evenly split on whether one political party would be better at handling the economy than the other

The majority felt change was most important, but didn’t have faith that merely changing parties would be sufficient to improve the economy. However, they did feel that a democratic win would signal a shift on Iraq and free up more money for domestic issues.

Who do they think will be the next President
Three quarters believe it will be a democrat with just under half assuming it will be Hillary Clinton and one-third expecting an Obama win.

Only 10% considered a Republican win likely – of those, McCain and Romney were in the lead.

Note: we did not recruit based on political affiliation but we believe there is a Democratic skew to the panel.

More Zandl Group press here.
Contact: info@zandlgroup.com