Kitchen & Bath Design News

JAN 2014

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Consumer Buying Trends { Demographics & buying patterns for the home } ® A CYGNUS BUSINESS MEDIA PUBLICATION SALES OFFICES NATIONAL SALES MANAGER MIDWEST Michael Mandozzi 3030 W. Salt Creek Lane Arlington Heights, IL 60005 Phone: 847-454-2715 Email: mike.mandozzi@cygnus.com Consumer Optimism, Spending Seen Divided by Income Levels NEW YORK — America is witnessing a distinct divide when it comes to consumer optimism and spending intent, with highincome consumers far more optimistic and willing to spend than consumers at lower income levels. And that bifurcation – or sharp divide – between the high and low end will likely continue to widen, at least through 2014. Those are the key fndings of a survey whose results were released last month by the New York-based investment house Goldman, Sachs & Co. The survey, conducted in September among 2,000 U.S. consumers, found overall consumer sentiment dipped in the third quarter of 2013 from second-quarter levels, but the levels of optimism difered greatly when separated by income levels, according to Goldman Sachs (see related graph below). "Consumers in $90,000-plus households saw increased levels of optimism, while consumers in under $50,000 households declined," Goldman Sachs' analyst Michael Kelter observed. "This is, in fact, the widest spread we have seen between these two income groups in our (ongoing consumer) surveys." And, according to the survey, it's not merely economic optimism that's diverging across income groups. Spending patterns are, too, Kelter said. "The total number of consumers who said they spent more in the past three months did tick up in our 3Q survey," the Goldman Sachs' analyst reported. "However, the bifurcation of high versus low-mid income consumers is clearly evident. Consumers in $90,000+ households reported an increase in spending in 3Q vs. 2Q, while consumers in under-$50,000 households reported a decrease in spending this quarter." Some analysts, who've termed the current income state as "Reallocation Nation," said consumers typically examine their income each month, along with their fxed expenses, and parcel out what's left over. The result is consumers with higher incomes are not cutting back as much as those with lower incomes. Goldman Sachs pointed the blame for the continued divergence between low- and high-income earners at the $200 billion of tax increases that took hold in January of 2013, including $125 billion related to the 2% payroll tax hike. "In our survey, 61% of consumers indicated that they noticed the impact of higher payroll taxes on their paycheck," Kelter said. "Of those, 42% indicated that they are therefore reducing spending, compared to 19% who said they continue to spend at previous levels." Those tax hikes disproportionately fell on spending in low- and mid-income households, who were not buoyed by the "wealth efect" in the same way high-income households were, Kelter pointed out. "In our view, one of the reasons why high-income consumers are likely less afected by the 2013 tax increases is the 'wealth efect,' a dynamic that disproportionately impacts high-income groups," he said. Kelter noted that 90% of consumers with more than $70,000 in annual income own their own home, while only 50% of those earning under $70,000 do. And, for those with more than $90,000 of household income relative to those with under $50,000 of household income, almost three times as many currently believe the value of their home is rising, and just as many say they're comfortable spending because asset prices are rising, Kelter noted. Goldman Sachs estimated that tax hikes reduced disposable personal-income growth in 2013 to 1-2%, compared to the 3-4% growth rate American households would have likely seen without the hikes. Goldman economists predicted that 2014 will be "the year U.S. economic growth will fnally take of after years of disappointing recovery in the wake of the fnancial crisis." CONSUMER SPENDING TRENDS BIFURCATED WEST/SOUTHWEST Kim Carroll 7355 19th Avenue NW Seattle, WA 98117 Phone: 206/781-0714; Fax: 206/473-0724 E-mail: kim.carroll@cygnus.com PRODUCT & LITERATURE SHOWCASE/CLASSIFIED ADS Nancy Campoli 558 Prospect Avenue River Vale, NJ 07675 Phone: 800/547-7377 x6127 E-mail: nancy.campoli@cygnus.com EDITORIAL OFFICES 3 Huntington Quadrangle, Suite 301N Melville, NY 11747 Janice Anne Costa, Editor Tel: 631/963-6233 E-mail: janice.costa@cygnus.com Anita Shaw, Managing Editor Tel: 631/963-6209 E-mail: anita.shaw@cygnus.com CORPORATE HEADQUARTERS 1233 Janesville Ave. Fort Atkinson, WI 53538 Phone: 631/845-2700; Fax: 631/845-2741 UNDER 50K 35% Joe May 297 Concord Road Marlborough, MA 01752 Phone: 800/547-7377 x2718 E-mail: joe.may@cygnus.com Kimberly Berndtson, Senior Editor Tel: 920/563-1722 E-mail: kim.berndtson@cygnus.com CONSUMER OPTIMISM RISES AMONG HIGH EARNERS, DECLINES AT LOW END 40% EAST/SOUTHEAST Joanne Naylor 540 Lee Court Wyckoff, NJ 07481 Phone: 201/891-9170; Fax: 201/839-9161 E-mail: joanne.naylor@cygnus.com 50K TO 90K 30% PUBLISHING HEADQUARTERS 90K+ 3030 W. Salt Creek Lane, Suite 200 Arlington Heights, IL 60005 25% Eliot Sefrin, Publisher Emeritus E-mail: eliot.sefrin@cygnus.com 20% Mark Taussig, Group Publisher E-mail: mark.taussig@cygnus.com 15% REPRINT SERVICES For reprints and licensing please contact Nick Iademarco at Wright's Media 877-652-5295 ext. 102 or niademarco@wrightsmedia.com. 10% 5% SUBSCRIPTIONS, BACK ISSUES 1233 Janesville Avenue Fort Atkinson, WI 53538 Tel: 920/563-1761; Fax: 920/563-1704 Source: Goldman Sachs Survey of 2,000 US consumers 0% 3Q13 2Q13 1Q13 4Q12 3Q12 2Q12 1Q12 4Q11 3Q11 2Q11 1Q11 4Q10 January 2014 ForResidentialPros.com | 11 MAILING LIST RENTAL Elizabeth Jackson Tel: 847-492-1350 ext. 18 E-mail: ejackson@meritdirect.com Web site: www.ForResidentialPros.com

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