Tags: price | increase | consumer | spending

WSJ: Price Increases, Stagnant Income Crimp Consumer Spending

By    |   Tuesday, 02 December 2014 01:35 PM

While official inflation figures are quite tame, sharp price increases for necessities such as healthcare, combined with stagnant income, is curbing consumer spending for the non-wealthy.

The middle class shelled out 24 percent more for healthcare in 2013 than in 2007, due largely to soaring health insurance costs, according to a Wall Street Journal analysis of government data.

Americans also have to pony up more for groceries, rent, education and cellphone and Internet service.

The Journal analyzed data from the Labor Department on 2013 out-of-pocket spending for households earning between about $18,000 and $95,000 a year, before taxes.

Overall spending for this income group increased 2.3 percent from 2007 to 2013, while inflation totaled approximately 12 percent and income rose less than half a percent.

Spending at restaurants fell 3.8 percent, while spending on food eaten at home increased 12.5 percent. In addition, spending on event admission and fees decreased 16.5 percent, while spending for boats, motor homes, cameras and party rentals fell 31 percent.

Spending on household textiles, such as bath and bed linens, decreased 26.5 percent.

So the overall inflation data has to be taken with a grain of salt. Consumer prices rose only 1.7 percent in the 12 months through October.

On the income front, average hourly wages barely topped inflation, advancing only 2 percent during that period.

The price increases and slim wage gains mean less money is available to the non-wealthy for spending on things such as clothes and movies, The Journal notes.

Luise Fortney, a Defense Department auditor in suburban Baltimore, is one of those pulling back. "We've cut a lot out — a lot of extras you used to get, so you can afford food and the electric. And you're trying to save for retirement," she told the paper.

In what may be evidence of the trend, Internet holiday shopping climbed 8.5 percent on Cyber Monday from a year earlier, down from 20.6 percent growth in 2013, according to IBM. The Monday after Thanksgiving is typically the busiest day of the year for online shopping, hence the name "Cyber Monday."

To be sure, "it's not like the day isn't growing," Jay Henderson, strategy program director at IBM, told Bloomberg. "It's just that the additional growth is being spread more evenly on other days."

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While official inflation figures are quite tame, sharp price increases for necessities such as healthcare, combined with stagnant income, is curbing consumer spending for the non-wealthy.
price, increase, consumer, spending
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2014-35-02
Tuesday, 02 December 2014 01:35 PM
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