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August 15, 2008

Where are we cutting?

With most families seeing their paychecks effectively shrink as prices rise faster than wages, spending cutbacks have to be made? So do we have any statistics telling us what households are doing without or at least with less of?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Yes, we do, and this is actually very interesting, I think actually very rational on the part of households. Where we see households cutting back the most is on big-ticket spending items. They're not buying as many cars and trucks. They're not buying as much furniture, building supplies and materials, all of those big-ticket items that cost a lot of money, people are cutting back on. Now on the flip side, we're obviously spending more at the gasoline station. We're also spending more at the supermarket and on health care. Of course, the supermarket because of food prices being up. Now, one interesting area, at least to me, where we haven't cut back is on eating out. You would think perhaps that people would say, 'Well, that's an area where we can cut back on, eat out less, eat in more, and we'll save money.' But actually currently, the statistics show that that's not the case. People are eating out as much as they were last year, and in fact, eating out is actually up about 5 percent over last year, although some of that is due to higher prices. So what I think might be happening is people are saying, 'Ok, we're not going to buy as many big-ticket items - we're cutting back there - but we're still going to treat ourselves to a meal out.' But I think as time goes on if the economy continues to remain sluggish, we're probably going to see those restaurant meals fall by the wayside."

Posted by Dave at August 15, 2008 08:00 AM