Consumer mood remains in recession

(CBS News) CHICAGO - We have just begun the fourth year of what has been a very bumpy recovery from the Great Recession. On Tuesday, we got some indications that better times may be near. For one thing, home prices were up more than 2 percent in May -- that's the third monthly increase. And Americans saw their incomes rise half a percent in June -- more than $500 per household on average.

Trouble is, Americans didn't spend any of it. In fact, they cut their spending by a tiny fraction -- one-tenth of a percent, or about $11 on average per household. That's the problem because consumer spending is 70 percent of our economy. We have a report on the fear of buying.

U.S. incomes rise, but spending lull hurts economy

Nobody feels this lull more in spending deeply than the nation's small businessmen, one of whom told us Tuesday he is looking for some light at the end of this tunnel.

"July sales definitely are down about 10 to 15 percent," said Jeff Pape, who sells athletic gear online and from his 5,500-square-foot store in Elmhurst, Illinois.

"What we see is that people aren't spending as much as they used to," he said. "People that might have come into the store and spent $150 or $200 on stuff are now backing off to $60 or $70.

To Pape, there's no mystery why.

"People that had jobs that were making $100,000 or $150,000, are now making $40,000 or $50,000, and that has to affect their spending," he said.

That in turn affects Pape and his work force, now down to two from four. He acknowledged that he had to cut back on the things he purchases for his store. "We're working with our vendors to try and keep our costs as low as we can," he said.

You can see that ripple effect across the country. Shopping centers reported just a 1.8 percent growth in sales over the last year -- barely ahead of the inflation rate of 1.7 percent -- suggesting the consumer mood at least remains in recession.

"They're definitely hearing all the news and all the politicians about what's going on with the recession and the economy and spending," said Pape. "And I mean, the proof is in the pudding."

One bright spot is back-to-school spending, expected to be up 14 percent over last year. But the back-to-school season is traditionally the second-biggest spending season of the year after the winter holidays. So it's really not considered a good test of consumer intentions.

[CaptainSmollett]

I'm astonished how Obama is going around the country selling his 'tax cut' plan, when it is not a tax cut at all. His tax cut plan won't lower your taxes one cent.

Obama's "tax cut" plan is nothing more than "not an increase".
He's claiming "no tax hike = tax cut". In effect, Obama is claiming credit for Bush's cuts! Are voters so stupid not to see this deceit?

The fact is that Obama promised no tax increases on the working class, yet ObamaCare is loaded with tax hikes on us. Obama is a liar and deceiver.

[hypnotoad72]

Businesses create jobs. If they are cutting wages, eliminating jobs, I suggest you ask them. Life wasn't grand before January 2009, nobody asked (then or now) "Are you better off now than you were 40 years ago?", and most politicians have a lesser effect on jobs and the economy than you'd think.

[nohater]

what's missing in this report is that while income has risen so have city taxes and fees. add to that county taxes and fees, then there are state taxes and fees. don't forget sales tax which is high in some areas. prices on goods have risen and most is crappy stuff made in china. prices are up on services too. food prices are up and going higher due to drought. as soon as the word is out that income has risen, prices go up even in mom/pop stores. as income rises so does the price of homes, autos, etc. if a person doesn't have to absolutely spend for something, then why should they as products are crappy, services poor, etc. best to save money unless absolutely necessary to spend on something. every business wants a piece of that increase in income. if the income increase is 500 bucks, it is easily consumed by basics.

[skeezix06]

Taxes and fees pay for services that you use. I agree with the rest of what you say though.

[MegaProcrastination]

Saying the recession ended four years ago is one of the biggest lies in this country. If the recession had ended, people would have money to spend. As it is, those of us who have incomes are often barely hanging on by our teeth. Gas prices go up, gas prices go down. Most groceries cost at least half again as much as they did five years ago, and in some cases twice as much. When the cost of living goes up spending on non-necessities gets cut.

Now here we are in July looking at the drought that has hit our agriculture areas and we know that it won't be long until we're paying anywhere from half again as much to twice as much as we are right now just to put food on the table. I can't speak for anyone else here but darned straight I'm hanging onto as much money as I can because once cold weather hits we'll likely be going in the hole just buying groceries and heating the house.

[hypnotoad72]

Agreed.

It did not end in 2010.

The "jobless recoveries" of 2002 and 2004 and whenever are misnomers in of themselves...

The shock jock DJ played the "pity trumpet" noise in response, but he makes $1 million/yr by badmouthing everyone else, so I wish he would be fired and having to do the same jobs you and I do. Then he might figure it out, but even then I doubt it. He even has a degree in radio communications (holy basket weaving, batman), but anyone with a slick presentation can say the most heinous things and get away with it... oh well.

[CaptainSmollett]

Obama owns it.

He promised Hope & Change....

He delivered Change & Hopelessness.

[tmittelstaed]

If you don't like Obama so much then why aren't you talking about the guy you want to replace him? Oh I forgot, you like that guy even less.

[hypnotoad72]

So what will your person do differently?

With details please, if you want to be seen as contributing rather than being mindlessly annoying.

[fedup29]

Who cares about the election? Neither of the candidates have our issues in mind. And what about that $500 being half a percent of average income? Gee, that makes average income $100K per year. I don't make a $100 K per year? Anybody here make $100K / year? that just shows how skewed the income level is.

[MegaProcrastination]

Nope, this household has a bit over 40K by the time we figure in some benefits. Granted, we are a one-income household. We also did not see an increase in that income this last June or for the past two or more years for that matter.

[hypnotoad72]

Agreed.

[dddphotoguy]

Consumers might be finding it hard to spend more on retail items when basics are going up: Health costs, Health Insurance, Gasoline, Utilities, Food. General Transportation costs (maintenance, repair, insurance). With income not going up, and essentials going up in price, there just is less and less left for retail items. And when they do buy retail , they need to find the lowest price, which contributes to lower spending statisticts. And lower priced items are made outside of America, making the likelihood of more jobs being created in America less likely. It is a vicious downward spiral. Until prices and quality of goods can compete with foreign made goods, Ammerica will have a hard time breaking free of the record setting recession

[tmittelstaed]

If the basics are going up the people selling the basics should be rolling in money - why aren't THEY spending any of it either?

[hypnotoad72]

And college.

[lami987]

As long as Bain and Romney wannabe keep sending jobs abroad our economy can never recover. We can recover only when a lot of us can afford to buy. Consumers are the real job creators not businesses or wealthy Americans. Businesses layoff workers when consumers aren't buying regardless of how much money or tax breaks they got.

[jscott418-21618367473133020464]

If Bain did not help reduce costs. Do you really think they would be in business employing any Americans? Don't be stupid.

[realtimecoffee]

Until you stop buying cheap imports and pay more for American goods Corps will continue to outsource because they follow the market as they've always done. Blaming Romney, or President Obama for that matter, is just political gamesmanship.

[froggybabe1]

Maybe if product prices would go down, consumers would spend more. Everyone wants to get the most money for the least amount of product or service possible. We are a money hungry society and when a typical family spends $800 or more a month for food, $500 a month for a car, $300 a month to put gas in that car, $2000 a month for a home, then you are talking an average salary of at least $50,000 a year to support that. The middle class is not making that anymore, so when they have to buy clothing and other items, they are already tapped out.

[tmittelstaed]

The average family is 4 people, @ $800 a month that's $200 per person, assuming 3 meals a day per person, and 30 days in a month, that's $2 per person a meal - that's pretty good budgeting I'd say. What are you complaining about?

[froggybabe1]

Maybe if product prices would go down, consumers would spend more. Everyone wants to get the most money for the least amount of product or service possible. We are a money hungry society and when a typical family spends $800 or more a month for food, $500 a month for a car, $300 a month to put gas in that car, $2000 a month for a home, then you are talking an average salary of at least $50,000 a year to support that. The middle class is not making that anymore, so when they have to buy clothing and other items, they are already tapped out.

[Dreadnut]

Hope and Change makes a crappy paycheck.