Consumer Nation

Research Firm Sees Signs Consumers Are Reining in Spending

The debate rages on about how consumers will fare in the face of higher gasoline prices, and so far the thesis has been that consumers have been able to bear the blow of higher prices because natural gas prices have been lower and the employment outlook is brighter.

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But what happens if those positive trends turn negative?

Research firm fromConsumer Edge Insightmay offer a glimpse of what’s ahead. Its gauge of discretionary spending by consumers is showing a fairly sharp slowdown over the past few weeks. The main driver appears to be uncertainty about household income and a fear that the momentum in the job market may be losing steam.

ConsumerEdge tracks 32 discretionary categories and measures them against their year-ago performance. In this index, discretionary spending rose 2.3 percent in December and 1.3 percent in January, but by February it only logged a gain of 0.4 percent.

At the same time, ConsumerEdge said the outlook consumers have about the job market soured in February. It had shown improvement from November through January. Also, for the second month in a row, consumers are more pessimistic about the outlook for their family's income.

These observations come as both the Conference Board and the CER’s own gauge of consumer confidence hit 12-month highs.

Also, while consumers are pulling back on spending for the moment, as measured by the index, they are claiming they are more willing to spend. This last trend was especially pronounced among consumers in higher income brackets.

Gasoline prices are up 12.6 percent, or 42 cents, since the start of the year and were averaging $3.78 a gallon in the week through Monday, according the Energy Information Agency.

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