What the Great Recession Means for Shopaholics

By Ashley M. Heher, AP Retail Writer

CHICAGO (AP) — A year after "shop 'til you drop" stopped, the nation fixates on this question: Will consumer spending ever return to pre-recession levels?

Increasingly, the answer appears to be no. Belt-tightening in bad times is normal. And after every other recession since World War II, penny-pinching quickly fell out of fashion and Americans resumed their demand for houses, cars and everything else.

This time it's different. Like the Great Depression in the 1930s, the Great Recession seems destined to turn many Americans into lasting coupon-cutters, scrimpers and savers. Consumers dug a debt hole over the past decade from which there's no easy climb out. The population segment that drives spending the most — baby boomers — faces special pressure: they're running out of time.

A study by research firm AlixPartners concluded that once a new normal sets in after this recession ends, Americans will spend at about 86% of their pre-downturn level.

In an economy driven by consumption, the implications are far-reaching if that forecast proves correct:

— For every kitchen not remodeled, there will be lost sales of appliances and supplies, and fewer jobs for designers and contractors. As homeowners do work around the house themselves, there will be less work for gardeners, plumbers and handymen.

— For every shopper who trades down from luxury stores to discount stores, it will mean less profit for retailers and manufacturers. Retailers will continue to offer few product choices and leaner inventories, and they'll reassess store locations and advertising.

— If sales of cars and trucks average closer to the recession level of 10 million a year than the 16 million in boom times, more suppliers will fail and further consolidation among automakers could occur. Taxes not paid on lost vehicle sales will continue to stress budgets of state and local governments.

Frugality may be good for family budgets, but it's bad for the national economy. And that has the potential to reinforce and continue the miserly mood. A Gallup survey last month found seven in 10 Americans are cutting weekly expenses — a number that has been consistent through the summer.

A year after the previous fall's financial meltdown turned a garden-variety recession into the worst downturn since the Depression, thriftiness is still driven by the twin engines of necessity and fear. Unemployment, now at 9.7%, is still rising and expected to reach double digits before year's end for the first time since 1982. Many who still have jobs are getting paid less, and investments have a long way to go before they return to pre-meltdown levels.

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