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US spending stayed cautious in July

PICKY Figures from MasterCard Advisors showed Americans cutting back on buying clothing, furniture and jewelry amid stagnant salaries and a high unemployment rate

AP AND AFP , NEW YORK AND WASHINGTON

Worried about the stalling economic recovery, US consumers remained reluctant to spend at stores last month, especially on pricier items like jewelry, though they let go of some money for travel, data released yesterday showed.

Revenue from high-end jewelry, which had held steady in June, plummeted last month from a year earlier, when the figures were already dismal. Furniture also suffered as the boost from homebuyer tax credits wore off. Shoppers even pulled back on shoes and children’s clothing, while luxury spending — excluding baubles — was virtually unchanged.

The figures from MasterCard Advisors’ SpendingPulse, which include transactions in all forms including cash, signal that spending remains choppy as shoppers grapple with an almost 10 percent unemployment rate and tight credit.

Online revenue offered one bright spot, gaining for the 12th straight month. Travel spending — including airlines, trains, rental cars and hotels — also rose from July last year, when it fell almost 2 percent.

The second-straight month with weak luxury sales contrasts with earlier in the year when the wealthy spent a bit more freely. The Standard & Poor’s 500 stock index has tumbled 9.5 percent since its high-water mark in late April, and home values fell 3.2 percent in the first quarter, according to the Standard & Poor’s/Case-Shiller 20-city home-price index.

The latest data from SpendingPulse follows government reports, released on Tuesday, that also show consumers being picky about how they spend their money.

The mighty US consumer — whose thirst for new products has for decades been a mainstay of the global economy — has trimmed spending as salaries have stagnated and more cash is saved, according to the latest US Department of Commerce figures.

In June Americans saved 6.4 percent of their income on average, the highest savings levels in a year.

The department’s figures also showed consumer spending dropped US$2.9 billion — less than 0.1 percent — while income increased by roughly the same amount.

Consumer spending is a key driver of US economic growth, usually accounting for two-thirds of output.

“The tide [in spending] doesn’t seem to be rising overall,” said Michael McNamara, vice president of research and analysis for SpendingPulse. “There hasn’t been a consistent improvement that has been sustainable.”

Instead, shoppers seem to be shifting their spending more than usual each month, he said, including extra movement last month away from discretionary items.

“Recoveries tend to not happen in straight lines,” he said.

“We are in a trough, but the question is, how long will the trough last?” he said.

Here are SpendingPulse’s figures comparing revenue for July 4 through July 31 with the same period a year earlier, by product category:

• Clothing (at mall-based stores): Overall clothing sales slipped 1.1 percent from a year ago, when they dropped 5.2 percent from July 2008.

• Footwear: Revenue down 2.9 percent from a year ago, when it fell 7.4 percent.

• Luxury: Excluding jewelry, revenue rose a meager 0.2 percent, compared with a year ago when business was down 16.3 percent.

• Jewelry: Overall sales dropped 1.2 percent overall, but high-end revenue fell 13 percent, compounding a 13.3 percent decline a year ago.

• Furniture: Sales slid 8.2 percent from a year ago, when business fell 10.5 percent.

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