Frugality Fatigue Spurs Americans to Trade Up

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http://www.bloomberg.com/news/2012-04-13/frugality-fatigue-spurs-americans-to-trade-up.html

“Frugality fatigue” is driving a rise in retail sales among consumers who’ve “grown tired of putting off discretionary purchases,” said Russell Price, a senior economist at Ameriprise Financial Inc. (AMP) in Detroit. Recent gains, including a 6.5 percent increase in February from a year earlier -- have been bolstered by improvements in consumer confidence and the labor and stock markets, along with some stabilization in home prices, he said.

“This has been a long, drawn-out recovery; and for most people alive today, it’s the longest they’ve had to conserve financially,” said Price, who was among the top-ranked forecasters of quarterly gross-domestic-product growth for the two years ending in February, according to the most-recent data compiled by Bloomberg. “As their prospects improve, some pent- up demand is being released.”
Even with a less-than-predicted gain in U.S. nonfarm payrolls last month -- 120,000 compared with a median forecast of 205,000 in a Bloomberg survey -- the economy has added 635,000 jobs since December as unemployment fell to 8.2 percent from 8.5 percent, Labor Department data show. Meanwhile, the median price of existing homes climbed 0.3 percent in February from a year earlier, the biggest gain since July 2010, and the Standard & Poor’s 500 Index is up 10 percent this year.

‘Feeling the Wealth’

Mid- to high-income consumers are “feeling the wealth effect” from an “amazing run” in the stock market, said Britt Beemer, chairman of America’s Research Group, a consumer- behavior research and consulting company based in Charleston, South Carolina. The gain is leading some people to purchase name brands in lieu of generic or buy spring fashions before they’ve been deeply discounted, he said.