While the Dow may be up and some experts are saying that consumer confidence is higher this month compared to previous months, there are many who disagree. According to a recent article in the Wall Street Journal, America's middle class has stopped spending as much money on things like eating out and alcohol.
This data marks the steepest one-year drop in spending since people started keeping records of it in 1984. Even though middle class after-tax income has stayed mostly the same over the past two years, holding steady at $45,199.
The poorest demographic spent more money over the year on things like food and rent. This groups spending rose 5.6% while they suffered a 5.5% decline in their after tax income, bringing the average income to $9,956. According to the report:
"What you're looking at here is people at the bottom trying to hang on," said Timothy Smeeding, public affairs professor and director of the Institute for Research on Poverty at the University of Wisconsin in Madison. "You can't go below a certain level."
While the middle class cut back on things like eating out and entertaining, the poorer demographic has found that they are spending 15.7% more on food compared to 2007. The price hikes have effected basic things like cereals, meats and vegetable. Because this group is often shopping at discount stores and using coupons, there really isn't much for them to cut back on. This makes the report of an increased consumer confidence seem like a myth. Retailers who say they have seen sales growth may have been seeing the effects of the upper middle class cutting back on their expenses rather than the lower income groups starting to spend.
Even the rich are cutting back on purchases. Their spending is reportedly down 2.6%.
"While their incomes are stable, their assets have declined," said Luigi Pistaferri, an economist at Stanford University in Palo Alto, Calif. "They're waiting to buy the boat or the expensive watches," and trying to rebuild wealth instead.
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By Melissa Kennedy- Melissa is a 9 year blog veteran and a freelance writer, along with helping others find the job of their dreams, she enjoys computer geekery, raising a teenager, supporting her local library, writing about herself in the third person and working on her next novel.
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