The economic downturn last year caused holders of American Express cards to cut spending sharply in such key categories as electronics, apparel and travel. However, cardholders increased their spending on education, pets, groceries, and medical or health-related activities, new customer-spending data American Express Co. released this week show.
AmEx’s Business Insights group gleaned the data from a representative sample of AmEx cardholders’ aggregate spending in various categories last year and compared the findings with similar data from 2007. The initiative is part of a proprietary study AmEx developed, with insight from independent economists, called “Harnessing the Opportunity: Engaging Consumer Mind-set as We Emerge from Recession.”
AmEx customers in 2009 spent 29% less on electronics than they did two years earlier, 26% less on both hotels and apparel, 25% less on computers, 24% less on home improvement, and 21% less on air travel, the issuer says.
Expenditures rose by 11% on education, by 7% on pets and pet-related items, by 3% on groceries, and by 2% on medical and health-related items.
The gains in those four categories were more pronounced among affluent cardholders. Affluent AmEx customers spent 20% more on education, 10% more on pets, and 5% more on medical and health care. Their spending on groceries also increased by 3%.
AmEx cardholders’ spending on mobile-phone services was one of the most resilient spending categories, declining by only 4% for general cardholders, according to the report. However, nonaffluent men ages 35 to 55 cut mobile-phone service spending by 41%, the data show.
The downturn in housing prices affected cardholder spending more than employment trends did last year, but ongoing high levels of unemployment are putting a damper on spending this year, the economists agreed.
And there are signs that the recession will have a long-term effect on consumer spending.
AmEx’s data suggest that, because consumers lost their jobs, investments and savings during the recession, their thriftiness in spending less on certain nonessential categories is likely to linger for a while, Dan Ariely, a Duke University behavioral economics professor, noted in the study. “Because habits are so important to how we make decisions and because the recession has changed our habits, these changes are here to stay, and they will outlive the actual recession itself,” he says.
Robert Thaler, a behavioral science and economics professor at the University of Chicago, agrees the recent downturn will linger for several years to come. “The next decade will certainly be a more frugal one, which means the economy is going to have to grow without consumers living beyond their means,” he noted in the report.
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