How markets affect the consumer

TEXT OF STORY

Kai Ryssdal: I think what we're going to do today is a little participatory public radio. So, repeat after me. Consumer spending. C'mon. Say it. Accounts for. Seventy percent of the American economy. So the news this morning that retail sales fells once again last month landed with an enormous thud. There have been hopes that things are beginning to turn around. But Ashley Milne-Tyte reports from New York, it's going to take more than hope.


ASHLEY MILNE-TYTE: The way Citigroup economist Steven Wieting sees it, everyone got a little drunk on hopeful economic indicators. So today's news means one heck of a headache. He says, yes, rising unemployment plays a role in cutting consumer demand. But it's only part of the problem.

STEVEN WIETING: We have perhaps a three percent decline in total employment in the United States, but the declines in durable goods expenditures in the year through one Q were 10 percent. People who fear losing their jobs hold back on their expenditures, not just the people who have actually lost their jobs.

People like Desiree Jennings. She and her husband have two mortgages, and their savings have taken a hit. But they have no credit-card debt, and they both earn six figures. Jennings says she could go shopping, but all the media gloom has terrified her.

DESIREE JENNINGS: We're very conscious now of our spending. The fear has just gotten to the point now where we second-guess whether we should spend $20 on a pair of running shorts for example.

They're saving more than usual too. Cary Leahy of Decision Economics says so are a lot of other people. He says spending may pick up, but consumers will continue to choose carefully. Which isn't good news for retailers.

CARY LEAHY: If your underlying demand for the kind of things you sell has diminished there's very little you can do other than keep cutting costs, and ultimately you just may have to go out of business because there's too many of you selling to too few of them.

He says retailers need to re-design themselves for a leaner buying landscape.

I'm Ashley Milne-Tyte for Marketplace.

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