Evidence of “frugal fatigue” resulting from the past two years of reduced spending surfaced in a new survey by The American Affluence Research Center that shows plans for increased spending in 17 product categories by affluent and luxury consumers.
Building upon the improved outlook first evident in the Fall 2009 survey, the results of this survey show further strengthening of future spending plans despite continuing signs of caution and concern among certain segments of the affluent.
This survey contained questions to help identify which segments of the affluent market were careful spenders and which were “free spenders” during the several years prior to the recession. The survey helps to understand who is burdened by pre-recession debt and spending, for what types of things they over spent, and what special steps they are now taking to reduce their debt.
Also included were questions to identify those who pursue a “green” lifestyle and those that follow a “low green lifestyle”. This produced data about current ownership of seven green or eco friendly products and plans to purchase any of the products during the next five years. Involvement in three types of green activities during the past five years and/or plans to do so in the next five years were also identified.
The Affluent Market Tracking Study #17, a survey of the wealthiest 10% of U.S. households, predicts slightly higher spending during the next 12 months despite their skeptical outlook for the economy and personal household income. Plans for changes in spending are well above historic lows established in the Spring 2009 survey but remain below pre-recession levels.
Consistent with the Fall 2009 survey, this new survey indicates the concepts of “new normal,” “stealth wealth,” and “luxury shame,” to the limited extent they existed, have been replaced by “frugal fatigue” among many luxury and affluent consumers.
Given the very negative rating of current business conditions by the affluent, their modest expectation of some improvement during the next 12 months is not particularly optimistic. They also show little enthusiasm for anticipated changes in the stock market and their personal household income.
Changes in spending plans for 8 major items and 17 different categories of products remain soft compared to prior reports in this 8 year series of twice-yearly surveys. This reflects continuing caution and concern among some affluent.
About 56% believe they are doing their part to help the environment, while 30% feel they should be doing more.
A third currently own none of the 7 “green” products listed. The most commonly owned green items are compact fluorescent light bulbs (45%), low flow toilets or faucets (44%), and EnergyStar appliances (40%). Green cleaning products (27%) was the only other item owned by more than 10%.
Half of the affluent do not expect to buy any of the 7 listed green products during the next five years. The most frequently anticipated purchases are a hybrid automobile (24%) and EnergyStar appliances (22%).
• In the current survey, 55% of the respondents have no plans to make any of the 8 major expenditures in the next 12 months. This is a slight improvement from the Fall 2009 survey.
• With the exception of building a new vacation home and building a new primary residence, the intent to purchase one of the various major items during the next 12 months has shown a marked improvement versus the Spring 2009 survey.
• As would be expected, those worried about their debt are less likely to be planning major purchases than the debt unconcerned. The same is true for pre recession careful spenders versus pre recession free spenders. Males, with only a few exceptions, are more likely to be planning acquisition of one of the items than are the females.
• Only one of the 17 spending categories is in positive territory (i.e., index of 100 or more). All 17 indexes are higher, typically by 4 to 9 points, from the Fall 2009 survey, in which all of the indexes rose by 10 to 15 points over the Spring 2009 levels.
• In 11of the 17 categories, 25% or more of the respondents plan to spend less during the next 12 months. On the positive side, in 16 of the 17 categories, about two-thirds or more of the respondents plan to spend the same or more as during the prior 12 months. This is an increase from the 10 categories in the Fall survey.
• Only 2% of the respondents indicate the debt on their home is greater than the value of the home. This contrasts with estimates that over 20% of all home mortgages in the U.S. are “under water” or larger than the home value. In general, the home equity is substantial across all demographic segments
• Only about half of the respondents said their total debt is not a cause of concern or worry.
• Almost 40% of the respondents reported they are not taking any special actions to reduce their current debt. Roughly the same number reported they are not taking on new debt.
• Almost three quarters of the respondents believe they lived within their means during the 7 years prior to the recession. This view was more prevalent among males and the highest net worth group.
The survey is based on a national sample representative of the wealthiest 10% of Americans, over 11 million households that account for half of total consumer spending and a third of gross domestic product.
This report is based on the responses from 525 men and women in households with an average annual income of $300,000, an average net worth of $3.1 million, average investable assets of $1.7 million, and an average primary residence value of $1.1 million.
The survey respondents represent 31 states and the District of Columbia. Ninety (90) percent are married. The average age is 57. Sixty-five (65) percent are males and thirty-five (35) percent are females.
This is the 17th in a continuing series of twice-yearly surveys of the wealthiest 10% of U.S. households, based on net worth, as determined by Federal Reserve Board research
Ron Kurtz, President and Owner, American Affluence Research Center