Monday, February 02, 2015

The drift away from stuff...

Even as wages remain sorta stagnant, Americans are enjoying a windfall from lower gasoline prices. But early evidence suggests it won't be going to buy more Things necessarily.
The couple, both 56 and from Emmaus, Pennsylvania, drive a lot so filling the tank didn’t leave much room for fun. Now they’re splurging after years of staycations, minor-league baseball games and free concerts. In October, they visited Disney World, their priciest vacation in ages. They’re also planning to renovate, meaning more trips to Home Depot Inc. “We’re finally starting to feel like we’re back in the middle class,” Cheryl Saul said.
Millions of Americans are benefiting from the collapse in gas prices, which Goldman Sachs Group Inc. equates to a tax cut worth as much as $125 billion. That’s potentially good news for a range of mass-market companies that have struggled while upscale establishments catering to wealthy Americans prospered. Family Dollar Stores Inc., Popeyes Louisiana Kitchen Inc. and McDonald’s Corp. all say they’re benefiting from lower gas prices or will in the second half.  [More]

Adding in my own anecdotal datum - Aaron reports Disney World is very busy right now - I wonder if the Great Recession has altered perhaps permanently the spending priorities, along with an aging population.
Yet for the vast majority, the shock of the Great Recession lingers — and that’s a good thing in terms of how most folks are managing their money. In a new survey from Fidelity, nearly half of respondents say even now they are saving more, reducing debt and building an emergency fund. 
A new survey from Principal Financial finds that the number of workers preparing for retirement is on the rise and that most workers who expect a tax refund plan to save or invest it, or pay down debt. Before the crisis, people commonly cited going on vacation and buying big ticket items as well.
Perhaps most telling, the Fidelity survey found that 78% of those who have taken steps to shore up their finances say the measures are part of a new and permanent personal financial strategy. “The sheer number of people who say the changes are permanent was probably most surprising,” says Ken Hevert, vice president of retirement products at Fidelity.People are moving from scared to prepared, Hevert says. When the financial crisis hit, 64% said they were scared and 45% said they were prepared; today, 45% say they are scared and 61% say they are prepared — a near perfect reversal. In general, those who feel prepared are the ones who have cut debt, increased savings and built an emergency fund. [More]
This feels about right, FWIW. And I think the breach of faith in the future felt by Boomers will be lasting, simply because of the characteristics of aging and attitude. We won't have enough time to get over this, so to speak.

Meanwhile, oncoming generations have never been as focused on accumulation of and economic signaling by "things". There seems to be a shift toward experiences like the vacations mentioned above over snazzier cars, for example.

We will have a hard time predicting future consumption from historical data, I think. This implies we will likely be disappointed by GDP growth (~70% consumer spending), retail sales, housing, and wages for some time. 

I am sure much of my thinking is influenced by availability bias - it's hard to imagine things being different from current conditions - but as secular stagnation becomes less a buzzword and more a reality, it is the best outlook guidance I can user to plan for the future.

In short, it may not get any better than this.

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