Americans giving up former ‘necessities’

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Even though economic indicators signal the Great Recession is over, for many American households it’s already reshaped our perspective of what we find necessary and what we can live without, according to a national survey earlier this year by the Pew Research Center on what consumers consider household luxuries versus necessities.

Necessity redefined

When the survey was last taken in April 2006, the euphoria of the housing boom still lingered, and the “necessity” rating for many household items reached a peak following an upward trend since 1996.

The latest survey, conducted in April 2009, shows an about-face for American consumers for half of the 12 household items tested, with a significant drop in necessity ratings for six items:

  • Clothes dryers down 17 points, from 83 percent in 2006 to 66 percent today.
  • Microwave ovens down 13 points percent from 68 percent to 47 percent.
  • Television sets down 12 points from 68 percent to 56 percent, the smallest share of couch potato-ness in more than 35 years, according to Pew.
  • Cable or satellite TV down 10 points from 33 percent to 23 percent.
  • Dishwashers down 14 points from 35 percent to 21 percent.
  • Home air conditioning — despite the news of global warming — down 17 points from 70 percent to 54 percent, though those in the Sun Belt still rated these systems favorably, according to Rich Morin, senior editor at Pew and co-author of the survey.

“This is the first time since the Depression that such a large number of consumers have faced the threat of losing their homes,” says Robert B. Nielsen, assistant professor of consumer economics at The University of Georgia in Athens. “It puts the concept of ‘necessities’ and ‘luxuries’ into context.”

Gadget giddiness

While it may sound fiscally schizophrenic, some high-end, high-tech items held their own or slightly increased in their necessity ratings, including cell phones, home computers, flat-screen TVs, high-speed Internet access and iPods. Cars also continue to be viewed by consumers as essential, with 88 percent rating it a necessity, and only a three-point drop from 2006.

“People who still have resources recognize that today a high-quality TV or an iPhone is an integral part of their lives, so that makes it a necessity,” says Michael Solomon, professor of marketing and director of the Center for Consumer Research at Saint Joseph’s University in Philadelphia.

“In some ways technology is prompting some of these shifts,” says Morin, citing the younger generation’s propensity for getting their information and entertainment through the Internet. While old-tech items like televisions and land line phones may be on the road to obsolescence, regardless of the economic climate, the sensitivity of other items may be just a factor of the survey’s timing say Morin and the experts. The survey results came on the heels of the lowest consumer confidence index — 25 percent reported by the Conference Board in February 2009 — in more than 40 years.

Cutting back

Pew also asked about nine specific cost-cutting measures and found that at least one in five consumers:

  • Bought less expensive or discount store brands (57 percent).
  • Cut spending on alcohol or cigarettes (28 percent).
  • Reduced or canceled cable or satellite TV (24 percent).
  • Reduced or canceled cell phone service (22 percent).
  • Made plans to plant a vegetable garden (21 percent).
  • Started doing yard work or home repairs they once hired out (20 percent).

Of all those surveyed, 80 percent say they had taken at least one specific step to trim expenses, while nearly 30 percent reduced spending at least four ways. While those hardest hit by the recession have been the most apt to pinch pennies, about 75 percent of all adults with family incomes of $100,000 or more have done at least one thing to economize.

So, is this new frugality here to stay? This live-without mentality has happened before say Nielsen and Solomon, both citing consumers’ gas-saving measures when the price of gas goes up and our gas-guzzling ways when gas prices go down.

“Although consumers have downgraded the brands they buy in some categories and they have shifted some behaviors, the jury is still out as to whether this is a relatively permanent change,” says Solomon.

American consumers will reframe their outlook when they regain confidence in the economy predicts Nielsen of the University of Georgia’s Consumer Research Center: “The longer the current economic uncertainty continues, the more likely it is that consumers will find substitutes for former necessities.”

With unemployment now at 10 percent (down from the October high of 10.2 percent, the highest jobless rate since 1983), when that consumer confidence will return is anyone’s guess.