72% of Americans Are Holding Back on This
NEW YORK (MainStreet) American consumers are reining in their spending habits and trying to ramp up their savings, according to a new Bankrate.com report.
Nearly three in four Americans are spending less and 32% of consumers said their stagnant income is the reason, the study said.
In the study, 24% of consumers said they believed they should save more of their earnings while 20% are worried about the current state of the economy. Only 27% of Americans said they are not holding back spending at all. The survey was conducted by Princeton Survey Research Associates International.
"This sheds light on why the economy is stuck in first gear," said Greg McBride, CFA, Bankrate.com's senior financial analyst. "Consumers don't have a whole lot of money to throw around."
The government shutdown and uncertainty emanating from Washington created a lot of worries about the economy and affected consumer sentiment, he said.
"With hundreds of thousands of government employees [having been] furloughed and many government contractors reeling from the shutdown, feelings of job security plummeted to the lowest level in nearly two years," McBride said. "70% of the economy relies on consumer spending, so when this many consumers are cutting back, it's going to be hard for the economy to get out of first gear."
Almost twice as many employed Americans are feeling less secure in their jobs now than those who are feeling more secure. Every age and income bracket feels less secure, led by the 50 to 64 age group.
"When you add it all up, the consumer doesn't have the spare money to ramp up their spending and this leads to weak demand," he said. "That keeps businesses from going out and hiring in bunches."
The survey also found that every age and income bracket is feeling less comfortable with the savings they have now compared to one year ago although every age and income bracket reports higher net worth than one year ago, except households with income under $30,000.
"They don't have any more money to spend this year than they did last year after you adjust for inflation," McBride said. "This significantly undermines Americans' feelings of job security."
Americans under age 50 are more likely to say their overall financial situation is better now than one year ago, while those 50 and older typically say it is now worse, the report said.
--Written by Ellen Chang for MainStreet