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Consumers Say It’s OK To Spend Again

11/28/2011

Higher prices on virtually everything we consume have become the new normal. Across the board consumer products are up 3.5 percent in October compared to a year ago. During the same period, spending increased 2 percent.

At Starbucks, where trading spiked coffee prices to $3 a pound last spring, the price of packaged coffee in its stores went up 17 percent. Likewise a grande cappuccino now sells for $4.25 up 23 percent from last year. The result? Starbucks store traffic rose 6 percent for the current fiscal year ending in October. More telling is the fact that revenue at Starbucks stores open at least 1 year increased 8 percent.

Consumers spent an average of $398.62 over the 4 day Thanksgiving weekend spend-a-thon, up 9.1 percent over last year.

So what gives? Prices are higher, the economic news remains sour, joblessness and underemployment is impacting nearly one in 5 Americans. Attitude. Higher prices and tough times are the new baseline. Consumers have become accustomed to the situation and have learned how to make the most of it.

Black Friday sales indicate that people were out buying for themselves and making discretionary on non-gift purchases such as electronics upgrades. Basically, consumers are telling themselves its ok to shop again.

This new perspective is tenuous at best. $4 a gallon gas, collapse of European economies or Pakistan pointing nukes to the west could put the whole thing in a tailspin in less than 24 hours. We’re whistling past the graveyard trying to convince ourselves everything is A-OK. We’re not out of the woods yet – so keep your powder dry.

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