Consumers Express Desire to Cut Back on Luxuries

According to a poll by Harris Interactive, consumers in America seem to be trending toward austerity these days. Italy saw its five-year bond yields spike to 6.5 percent. And Wall Street had another down day on Wednesday, with the losses attributed this time to panicky feelings in the commodities markets.

December 15, 2011
By Dees Stribling, Contributing Editor

Image courtesy Flickr user kevinspencer

Europeans might go for public-sector austerity — or at least be forced into it by the Germans –but it’s consumers in America who seem to be trending toward austerity these days, according to a poll released this week by Harris Interactive. Among other things, the poll found that roughly six in ten U.S. adults say they’re likely to cut spending on eating out at restaurants (61 percent) and on entertainment (58 percent) within the next six months. That attitude might be something of a new normal, since six months ago, about the same number of survey respondents told Harris Interactive the same thing.

Also, the respondents (about 2,500 adults between Nov. 7 and Nov. 14) said that buying certain big-ticket items probably isn’t in the cards in the near future. Fully 93 percent said buying a house or condo in the next six months was “unlikely,” while 88 percent said the same thing about a new car, truck or van. A whopping 97 percent said that buying a boat or RV is pretty much out of the question. (Then again, even if 3 percent of Americans bought a boat in such a short time, that would be beyond the wildest dreams of boat manufacturers — so it seems likely that the 3 percent includes those who dream of buying a boat pretty intensely, but never do it.)

Does consumer austerity mean savings will correspondingly rise? Not really. The respondents were almost evenly split on that question: 51 percent say they’re likely to save or invest more in the next six months, while 49 percent say they’re unlikely to do so. These numbers have remained fairly constant since November 2008, when 49 percent said they would save or invest more money, noted Harris Interactive.

Who Wants Italian Bonds?

Bond yields usually don’t count as scintillating news, except maybe to bond traders, but lately the wider world has been paying closer attention than before to yields on various sovereign-debt instruments, especially those of various Mediterranean countries. On Wednesday, Italy saw its five-year bond yields spike to 6.47 percent, the highest for that form of debt since the introduction of the euro in that country, a move it might well be regretting these days.

Moreover, the auction was relatively small, only 3 billion euros ($3.9 billion) of the Sept. 2016 BTP bond. Clearly, investors are still vexed by the euro in general and Italy in particular, and Italy’s going to have to pull some rabbits out of a number of hats to meet its goal next year of selling 440 billion euros ($571 billion) worth of bonds to increasingly skeptical buyers.

Germany, on the other hand, had no trouble selling 4.18 billion euros ($5.45 billion) worth of two-year notes at an average yield of 0.29 percent — there was more demand that supply in that case. The French Treasury, which had scheduled one more auction this year for two days after Christmas, decided that it didn’t want to find out whether investors were in the mood for French paper, so it cancelled the sale.

Commodities, Equities Tumble

Wall Street had another down day on Wednesday, with the losses attributed this time to panicky feelings in the commodities markets, which in turn seemed to be reacting to the sense that for all the jawboning among euro-zone leaders recently, the underlying debt problems still fester. That sense might have been exacerbated by chatter on Wednesday that France is about to join the club of downgraded credit-rating nations.

Crude oil dropped $5.19 a barrel, or about 5.2 percent, to below $95 a barrel, which was the sharpest drop since September. Precious metals took a tumble too, with gold down 4.6 percent to about $1,587 per troy ounce. Oil and gold are still up about 4 percent and 11.5 percent respectively for the year, however.

In any case, the Dow Jones Industrial Average dropped 131.46 points, or 1.1 percent on Wednesday. The S&P 500 lost 1.13 percent and the Nasdaq declined 1.55 percent.