Make us your home page

As economy recovers, consumers feel 'frugality fatigue'

NEW YORK — Some Americans are buying more expensive makeup and sandwiches again, as their economic prospects are improving.

Proof? Estee Lauder, Dunkin' Brands Group and others are seeing sales increase.

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 in Charleston, S.C.

"Frugality fatigue" is driving a rise in retail sales among consumers who have "grown tired of putting off discretionary purchases," said Russell Price, a senior economist at Ameriprise Financial in Detroit.

"This has been a long, drawn-out recovery, and for most people alive today, it's the longest they've had to conserve financially," Price said. "As their prospects improve, some pent-up demand is being released."

Estee Lauder's "high-end luxury" skin care and makeup brands are growing "faster than average," benefiting from consumer trade-up and affluent shoppers, president and chief executive officer Fabrizio Freda said Feb. 24. The New York company's 16.5-ounce Creme de la Mer moisturizing cream sells for $1,800.

Customers at BJ's Restaurants are ordering more appetizers or drinks with their meals, chairman and CEO Gerald Deitchle said in February. BJ's is "selling more items per 100 guests today than we ever have in the history of the company."

Americans will probably eat out more frequently in the next 90 days — and spend more while doing so — as their financial health improves, based on monthly surveys by RBC Capital Markets in New York.

The portion of respondents who said they spent more than planned at restaurants during the past 30 days reached a record 31 percent in February, according to a quarterly survey. They predicted they will spend a combined $37.01 on restaurant meals each week for the next three months, up 2.7 percent from a year earlier.

Customers at fast-food chains such as Dunkin' Brands doughnut shops are opting for a "better level of sandwich," chief executive Nigel Travis said in February. This has helped drive a "higher average ticket," with its sausage breakfast sandwich one of the best-performing limited-time offers in the company's history.

As Americans have "learned to live with less," income tax refunds could increase their willingness to spend, said Beemer. The spending boost may be temporary because rising gasoline prices are "the biggest nemesis to retail sales," Beemer said.

As economy recovers, consumers feel 'frugality fatigue' 04/13/12 [Last modified: Friday, April 13, 2012 7:38pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Bloomberg News.

Join the discussion: Click to view comments, add yours