Analysis: Many people curb spending in two-speed U.S. economy

Tue Mar 12, 2013 4:16pm EDT
 
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By Martinne Geller and Lisa Baertlein

(Reuters) - The Dow Jones industrial average is at an all-time high, the U.S. jobless rate has fallen to a four-year low and the housing market is seeing a recovery, but for many lower income and middle class Americans, the improving economy has yet to take hold.

Instead, they are anxious enough about higher gasoline prices and a payroll tax increase to slash their spending.

An online poll of 1,538 people conducted March 4-8 by Reuters/Ipsos found that two-thirds of adults say they are cutting their monthly spending and almost all of the rest say their spending is little changed (For a graphic with poll results, click here: link.reuters.com/hux56t)

The biggest reason given by those who said they are cutting spending - 72 percent of those polled - was increasing savings and paying off debts. The second biggest was higher gas prices, cited by 63 percent.

Of those cutting back specifically because of gas prices or tax increases, 81 percent said they are cutting down on meals at restaurants, 73 percent are reducing entertainment costs such as movies and concerts and 62 percent are spending less on travel and vacations.

At the same time, affluent consumers are showing signs of increased confidence, according to at least one recent survey. This bifurcation may play into concerns about income inequality and could add to pressure on President Barack Obama and Democrat lawmakers in Congress to resist any budget deficit cutting deal that reduces spending on the social safety net and doesn't include further taxes on the wealthy.

Some of those polled were willing to talk about why they were curbing spending.

Donna Gilbert doesn't even go all the way downstairs in her Webster, New Hampshire, house because it costs too much to heat. "We don't turn the heat on that much anymore. We use the wood stove ... We have plenty of trees, thank God. We've cut back on just about everything. We don't use the basement anymore," said Gilbert, 59, who is disabled and consolidates grocery shopping trips to save on gas money.   Continued...

 
A job seeker fills out forms at a table while attending a career fair with prospective employers in New York City, October 24, 2012. REUTERS/Mike Segar