For 2012,Projector Lamp Signs Point to Tepid Consumer Spending

For 2012,Projector Lamp Signs Point to Tepid Consumer Spending
As the weak economy has trudged on, they have leaned on credit cards to pay for holiday gifts, many bought at discounts. They are dipping into savings to cover spikes in gas, food and rent. They are substituting domestic vacations for international trips, squeezing more life out of their washing machines and refrigerators and switching to alternatives as meat prices have risen.

That leaves little room for a big increase in spending in 2012, economists say, a shaky foundation for the most important pillar of the American economy.Ceramic tile

“The consumer is far from healthy,” said Steve Blitz, senior economist for ITG Investment Research.

Even the seemingly robust holiday shopping season is raising concern. After a strong start on Thanksgiving weekend, a pronounced lull followed, causing retailers to mark down products heavily in the week before Christmas. While final numbers for the season are not in, analysts say they are worried that retailers had to eat into profits to generate high revenues.Cable Ties

Consumer spending makes up 70 percent of the economy,RUBBER MATS so until it ignites, general growth is likely to be sluggish.

Macroeconomic Advisers, a forecasting company, projects growth of around 2 percent for the first half of this year,Insulator down from an estimate of 3.6 percent in the fourth quarter of 2011 and just 1.8 percent in the third quarter.

For consumers, the reasons for the sluggishness are clear: incomes are essentially flat, job growth is modest, and more than 40 percent of the new jobs in the last two years have been in low-paying sectors like retail and hospitality.

While consumer spending is not “going to collapse,” said Joel Prakken, senior managing director at Macroeconomic Advisers, “there are some headwinds there.”

Sarah M. Manley, a marketing consultant with two young sons in Waconia, Minn., has developed coping strategies in the last few years. Laid off in 2008, she started a business. She and her husband can make their mortgage payments and are paying off debts from when a storm damaged their roof.

“It’s not necessarily that I’m saving more money, but I’m paying off some of the debts that were amassed during the last three years, just trying to make headway,” Ms. Manley said.

To do that, she has changed habits. She uses the app GasBuddy to check prices at nearby stations before she buys gas for her car. She buys seasonal food on sale and freezes it — for Valentine’s Day, she plans to prepare crab legs she bought and froze last summer — and she is stocking up on holiday hams. She has switched from buying milk in gallon containers to buying it for less in plastic bags from the local gas station.

For big purchases, like the laptop she bought last summer, Ms. Manley still relies on credit, but is careful. She opens credit card accounts offering an introductory rate of no interest, then closes them just before the annual percentage rate kicks in.

“Everybody’s learned how to be frugal in the last two or three years,” she said.

Economic indicators suggest that, while things may not get worse for consumers this year, they will not get much better. In the third quarter of 2011, the most recent period for which figures are available, consumer spending rose slightly more than 1 percent, according to the Commerce Department.

Although housing sales have recently shown signs of recovery, prices are still falling and mortgage lenders are cautious. In November, contracts represented by 33 percent of members of the National Association of Realtors did not close, up from just 9 percent a year ago.

And with more than one in every five borrowers still owing more than their homes are worth, many homeowners feel too pressed to spend on much more than the essentials.

The stock market did not help consumers, either. Because of turmoil in the markets in the late summer and early fall, household wealth declined by $2.4 trillion in that period, a contraction likely to make people think twice about big purchases.

Adding to the uncertainty, financial weakness in Europe, and the potential expiration of the payroll tax cut and unemployment insurance benefits in two months, could further soften spending.