Saturday, February 07, 2009

Spending during Recession

What is one supposed to do in an economic downturn like the one we are experiencing now? With the people I speak to, I often seen the wide range of ideas from hiding the real money under the mattress to spend to boost the economy. The truth must be somewhere in the middle.

Today was a gloomy day around where I live. For the last few weeks, the weather was exceptionally warm and it was beginning to look like the winter was behind us, but that changed all of a sudden in typical california style. To get over the gloominess and to get my 4 year old S off my back, we set off to the near-by mall. I am not much of a shopper - my shopping normally revolves around thinking about buying something, rushing to the store, picking it up and never returning it even if it doesn't fit my needs well. So this time around, I had nothing to buy - S and I were just walking around.

With all the recession talk 24/7, I imagined a deserted parking lot, empty cashier lines and a far thinner crowd. But, was I wrong or what? The Macy's still had enough customers, Starbucks had a line that was spilling into the street, the counter bar in the restaurant was still milling with people. This may completely be a coincidence after all, but really the people are not reducing their spending yet? So, I looked around to see what the official statistics on consumer spending was - the consumer spending rose only 3.6% in all of 2008, the worst since 1961. Clearly, the spending habits have changed and I hope what I saw wasn't people spending away their severance payments! Sometimes when the disaster strikes, people's tendency is to pretend like nothing ever happened. Given nobody knows how long this one is going to last, that may not be a sound strategy at all.

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