Holding Off on a Haircut to Buy a New Car

This is a good look at where people have been spending their money or yet put a better way where they are not spending and not spending on.  According to this WSJ article spending on goods is up to 9.1% since the recovery started vs. discretionary spending  is up only 2.8%.


From the WSJ

• It is normal for spending on goods to bounce back faster than service spending during a recovery, but this time around, the disparity is especially stark. Since the second quarter of 2009, when the recovery began, spending on discretionary services—or those besides housing, health care and certain banking services—has grown a mere 2.8%, when the figures are adjusted for inflation, according to a Wall Street Journal analysis of Commerce Department data.
• Kate Bagoy typifies this split. The 33-year-old graphic designer earns $90 an hour for contract and freelance work. But with the economy shaky and work less plentiful, she has been holding back on spending for services. She now waits 10 weeks between haircuts, compared with six weeks before, and she eats out less. And yet, she recently shelled out $2,000 for a new bed and took on a car loan to get a new Volkswagen.
• The difference, she said, is that services represent fleeting experience, as compared with buying something with enduring value. "I can skip a dinner or two to pay off a credit card, but I'm going to have this bed for 20 years," she said.

• Even more-essential services are getting hit hard. Through the third quarter, spending on car repairs was 14.1% below the level it was in fourth quarter of 2007, the last quarter before the last recession started. Spending on moving and storage was down 5.4% during the same period, while spending on veterinary services dropped 3.9%.
• Spending on goods, meanwhile, has been much healthier. Sales of personal technology like phones and video equipment are well above prerecession levels. Overall adult apparel sales were up 1.2% through the first nine months of 2011 versus the same time period a year ago, according to research firm NPD Group.
• Small cutbacks are a big reason Massimo Liguori, owner of Salon Massimo in Connecticut, closed down one of his two locations. While people continue to come in for haircuts, other customers are canceling higher-cost treatments like keratin hair straightening that runs $335.