NEW YORK | The gloomiest outlook for the economy in 35 years may be forcing Americans to live with what they have and save up for what they want.
Lynda Nicely has been living in a sparsely furnished rental apartment in a Milwaukee suburb since October while she saves enough money for furniture at a second hand store. And when temperatures soar this summer, she plans to buy a fan, not an air conditioner.
"I am a little rattled," said the 28-year-old resident of West Allis, Wis., who took a second job as a waitress and plans to hoard three months worth of emergency cash just in case she loses her primary job in public relations.
A growing number of anxious people across all income segments are shopping at less expensive stores, reacquainting themselves with the library, paying down credit card debt and cutting back on new clothes and cars, vacations and meals out. The psychology of the American consumer has turned as worries heighten about the job market, the slump in real estate and soaring daily living costs.
Industry followers say shoppers' fear, which has been escalating since last July, could very well worsen what ails us.
Such spending cuts could be "a self-fulfilling prophesy" and could hasten the economy's slide, said Lynn Franco, director of The Conference Board Consumer Research Center.
"I don't think (the spending slump) has bottomed out," said Candace Corlett, principal at consulting firm WSL Strategic Retail. "Shoppers are learning a new behavior: how to resist temptation. There is a lot of fear out there."
Such worries are driving shoppers to cut back on big-ticket items like appliances, delay redecorating their houses and shop at discounters like Wal-Mart Stores Inc. and thrift stores for second hand clothing. They're particularly avoiding full-priced fashion chains and department stores at the mall.
Consumers have every right to be nervous -- the government data out Friday showed unemployment and job losses were higher than expected. It also reported only modest wage growth, which makes people feel like they are losing money as food and gas prices keep rising.
Shoppers' economic outlook for the next six months is at a 35-year low, levels not seen since the Oil Embargo and the Watergate scandal, according to a reading last week by the Conference Board, a business-backed research group. The report showed that fewer consumers plan to buy big appliances like air conditioners, TVs and refrigerators within the next six months.
Retailers struggled through yet another sluggish month, with March sales at stores open at least a year expected to fall slightly from a year earlier, according to the International Council of Shopping Centers-UBS tally. J.C. Penney Co. warned last week of at least a 10 percent drop in same-store sales for March and slashed its first-quarter earnings forecast. Retailers are set to report final figures on Thursday.
Many analysts expect only a small sales lift starting in May when consumers begin receiving rebate checks from the federal government's stimulus plan, but any bump should only be temporary. Michael P. Niemira, chief economist at the shopping center group, believes the malaise could extend into next year.
Consumers are also increasingly concerned about inflation, with the Energy Department anticipating that gas prices will peak near $3.50 a gallon this spring. Many analysts believe prices could go much higher.
