Industry News | April 16, 2009

Are Consumers at Their Cost-Cutting Limits?

The latest information from The NPD Group Inc.’s Economy Tracker shows consumer confidence continues to decline, albeit slightly, while intent to spend at retail remains steady, indicating that consumers may have reached their cost-cutting limits.

According to the tracking study, consumers’ perception of the economy slipped a fraction of a point to 36.5 in March from 36.7 in February. “With the indicator off only a fraction of a point, consumers’ perception of our economic situation is virtually unchanged from last month,” says Marshal Cohen, chief industry analyst, The NPD Group Inc. The Economy Tracker measures consumer concerns regarding the economy on a scale between 0 and 100, with 0 being “Very Concerned” and 100 being “Very Confident.”

With concern down only slightly, consumers did not dial back spending intentions. The Economy Tracker’s Retail Response Indicator rose 0.5 points in March. “This slight rise could be an indication that we are seeing the beginning of stabilization,” Cohen says. The Retail Response indicator measures consumer spending intentions on a 0 to 100 scale, with 0 representing “Reduce or Spend Less” and 100 representing “Spend More.”

“Despite continued news about economic challenges and the tough jobless numbers March brought, I am encouraged that consumers aren’t saying they’ll cut spending further," Cohen says. "I believe that consumers have reached the point where they’ve cut as much as they can and just need to replenish. Consumers are telling us they are thinking about spending again, but spending with caution."

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