Economic Pinch Hits The Upper Middle-Class

It's another sign of economic doldrums - Tiffany's, the jewel of the nation's luxury retailers, is loosing its luster. Holiday sales in its U.S. stores were disappointing.

Even though Tiffany's wealthiest customers continued to spend, with strong sales for 10 to 50-thousand dollars items, one important group, the mid-tier luxury consumer, held back on the 1-thousand to 10-thousand dollar purchases.

Candace Corlett's company, WSL Strategic Retail, monitors consumer spending. She spoke with CBS News correspondent Randall Pinkston and described the factors affecting these consumers' spending.

"This holiday season with the increasing mortgage rates, the increasing fuel prices," Corlett explained, "this upper tier shopper hit the wall."

Other high end retailers like Nordstroms, Saks and Coach were also down, joining JC Penny's, Macy's and Target, suggesting that shoppers across the board tightened their purse strings.

Retail analyst Steven Platt is seeing the impact of this trend.

"Between high debt levels, trouble in the real estate market, trouble in the stock market, deteriorating labor market, high energy prices - the consumer's spent," Platt said. "They have no place left to go but cut back."

Consumer spending, especially among the upper middle-class, normally keeps the economy ticking, but for the first time in years, that group is making hard choices.

"It's a new situation for them," Corlett noted. "They now have to choose whether it'll be the $1,500 flat screen TV or the $1,500 jewel from Tiffany, They can't buy both anymore."

With stock prices falling and energy costs rising, cutbacks in spending by wealthier consumers could put the final whammy on the economy's engine.

"We think the wheels are about ready to fall off the proverbial truck here," said Platt. "We think things are going to get a lot worse than better in the first quarter, first half of '08."

Pinkston reports that this is a view shared by many analysts. While everyone waits to see just how far the economy will fall, consumers across the board are becoming more nervous, and more careful, about where they spend their money.