Americans Tighten their Belts

The Wall Street Journal is reporting that the American Consumer is drastically reducing their spending on food.   They’re reporting that restaurant patronage is way down and that households are opting for generic products and home brewed coffee. They’ve also begun bargain shopping.

In 2008’s fourth quarter, consumer spending on food fell at an inflation-adjusted 3.7% from the third quarter, according to data from the Commerce Department’s Bureau of Economic Analysis. That is the steepest decline in the 62 years the government has compiled the figure. The report is based on receipts from a sampling of food-oriented businesses across the country.

The big drop likely comes from two things, said Joseph Carson, an economist at AllianceBernstein who worked at the Commerce Department in the 1970s. First, consumers have been trading down to lower-priced items. Second, he thinks many households dug into their pantries for staples rather than going to the store, a trend that can’t continue indefinitely. “You can’t contract at this rate for long,” he said. “It’s just shocking.”

Restaurants usually are hard hit during recessions as they are  seen more as luxury goods than necessities.  The first indication of a recession frequently comes from this sector.  You’ll see a lot of folks eating at the upscale bistros less while places like McDonald’s with their dollar value meals will get more business.  The Journal is reporting that trend.

Declining sales at established locations have forced Starbucks Corp., Ruby Tuesday Inc. and other chains to shut hundreds of outlets and put many independent restaurants out of business.

On Wednesday, P.F. Chang’s China Bistro Inc. said same-store sales fell 7.1% at its bistro locations in the fourth quarter, and the deterioration intensified as the quarter progressed. “The lights went out in December,” Robert Vivian, the company’s co-chief executive, told investors.

The shift has a silver lining for some companies. While supermarkets passed along last year’s high ingredient costs to customers, McDonald’s Corp. and other fast-food chains absorbed some of the expense and kept many items priced at $1. Now, some consumers consider a fast-food meal a bargain. On Monday, McDonald’s said same-store sales rose 7.1% in January, including a 5.4% increase in the U.S.

People will also switch to staying home and cooking their own meals.  They also adjust the types of things they will buy.  Right now sales on pet food, meat and poultry, sweets, cereals and alcoholic beverages are down.  Sales of  dairy products and vegetables are up.  You’ll also see an increase in the use of coupons and consumers will focus on planning their meals around the weekly sales items.

This news also comes as Consumer Sentiment continues to fall.  Market Watch reports :

Amid persistent economic turmoil, a key index of consumer sentiment fell in early February to 56.2 from 61.2 in January, according to reported results Friday of the University of Michigan and Reuters survey.
Analysts polled by MarketWatch had been looking for a February reading of 61.

Additionally, we have hit a record high for ongoing jobless claims.  This is also reported by Market watch today.

For the week ending Jan. 31, the number of Americans receiving state jobless benefits rose 11,000 to a record 4.81 million. The four-week moving average of these continuing claims also reached a record, rising 73,750 to 4.75 million.
The continuing claims result is “incredibly worrisome,” wrote Dan Greenhaus of the equity strategy group at Miller Tabak.
While the pace of layoffs will eventually decline, the larger concern for the economy is how long it takes us to get the people not working back to a fulltime job,” Greenhaus wrote. “Those 4.8 million people are not spending money, not going out to eat, not traveling to other states on vacation and not buying gifts for friends’ birthdays.”

There is even a lot of worry among the candy companies that sales of chocolates for valentine’s day will be off the usual mark.  I’ve been doing a lot of belt -tightening myself, but I have to tell the Godiva folks not to worry about my chocolate demand.  It continues forward at its usual high level.  I’m also doing my part for the California wine makers.  At least until my new little grape vineyard in my “Obama Victory Garden” starts doing its thing.  I’m wondering if  there will be chocolate lines for me instead of bread lines since I stay on a low carb diet?  So, how are you tightening your belt these days?