The economic recovery has been helped in large part by the spending of the most affluent. Now, even the rich appear to be tightening their belts.
Multimedia
Graphic
Saving vs. SpendingLate last year, the highest-income households started spending more confidently, while other consumers held back. But their confidence has since ebbed, according to retail sales reports and some economic analysis.
“One of the reasons that the recovery has lost momentum is that high-end consumers have become more jittery and more cautious,” said Mark Zandi, chief economist for Moody’s Analytics.
That cautious attitude stems in part from concerns about global instability, especially in Europe, and in part from the volatility of the stock market in recent months. Major stock indexes fell sharply on Friday, after several big companies announced disappointing earnings. Bank stocks were the biggest losers as investors wrestled with the twin issues of lower trading profits from Citibank and Bank of America and the prospect that new financial regulation would further crimp their businesses.
Though stock performance has a bigger psychological and financial impact on high-income households, consumers of all income levels are fretting more about their financial future, perhaps bracing for the possibility of another economic contraction. Consumer confidence slumped in July to its lowest point since August 2009 in the Thomson Reuters/University of Michigan index released on Friday.
The Dow Jones industrial average slipped 261.41 points to 10,097.9 on Friday, for a loss of 2.52 percent. For the year, broad-based stock indexes in the United States all show losses of more than 3 percent.
Even Federal Reserve policy makers have acknowledged that the recovery is losing steam and suggested that should conditions worsen further, additional stimulus may be needed, according to minutes of their last meeting, released on Wednesday.
Especially at this stage of a recovery, businesses and economists want to see people of all incomes spending more, because the demand for goods and services would in turn encourage companies to hire workers. The American consumer accounts for an estimated 60 percent of the country’s economic activity.
But the Top 5 percent in income earners — those households earning $210,000 or more — account for about one-third of consumer outlays, including spending on goods and services, interest payments on consumer debt and cash gifts, according to an analysis of Federal Reserve data by Moody’s Analytics. That means the purchasing decisions of the rich have an outsize effect on economic data. According to Gallup, spending by upper-income consumers — defined as those earning $90,000 or more — surged to an average of $145 a day in May, up 33 percent from a year earlier.
Then in June, that daily average slid to $119. “I think a lot of that feeling that the worst was over has sort of abated,” said Dennis J. Jacobe, Gallup’s chief economist.
Although real estate brokers in Manhattan and the Hamptons report that buyers at the high end have returned, and Mercedes sales in the United States are up 26 percent this year, other indicators suggest a slowdown.
At the high end, luxury hotel chains like the Four Seasons and Ritz Carlton said bookings were much stronger earlier this year but had recently slowed. And upscale retailers, including Saks and Neiman Marcus, said sales growth eased in June. Overall retail sales slid in June from May, the government said this week.
To the extent that the wariness of the affluent is driven mainly by nerves and sentiment, economists hope that it will be temporary. “If growth is actually solid, those fears will dissipate,” said Dean Maki, chief United States economist at Barclays Capital and a former senior economist at the Federal Reserve Board.
The worry, of course, is that consumers will stop spending because of their concerns about a slowdown, and that economic growth will slow because consumers have stopped spending.
After virtually shutting down during the financial collapse in late 2008, the wealthy began to open their wallets wider last year, in part because a stock market rally helped them feel better off financially.
By spring of last year, the savings rate — which represents the percentage of after-tax income not spent — of the top 5 percent of income earners had turned negative, according to the analysis by Moody’s Analytics. That meant the group was spending more than it made.
Less well-off consumers remained more frugal, most likely constrained by unemployment, declines in home values and the disappearance of easy credit. So the savings rate actually rose last year for those in middle-income brackets as they cut spending.
Job losses have disproportionately hit those at the lower end of the wage scale. According to the Labor Department, the unemployment rate among people in management, business or financial occupations was 4.8 percent in June, compared to 9.5 percent over all, 18.2 percent in construction and 12.1 percent in production.
Saturday, July 17, 2010
Iran’s President Now Aims at Rivals Among Conservatives
TEHRAN — Having successfully suppressed the opposition uprising that followed last summer’s disputed presidential election, President Mahmoud Ahmadinejad and his supporters are now renewing their efforts to marginalize another rival group — Iran’s traditional conservatives.
Enlarge This Image
European Pressphoto Agency
President Mahmoud Ahmadinejad, second from right, and former President Ali Akbar Rafsanjani, left, lead feuding factions.
Related
Toll Rises From Twin Suicide Bombings at Iranian Mosque (July 17, 2010)
Times Topics: Mahmoud Ahmadinejad | IranConservative rivals of Mr. Ahmadinejad are fighting back, publicly accusing him of sidelining clerics and the Parliament, pursuing an “extremist” ideology, and scheming to consolidate control over all branches of Iran’s political system.
“Now that they think they have ejected the reformists, maybe they think it is time to remove their principalist opponents,” said Morteza Nabavi, the editor of a mainstream conservative newspaper, in an unusually blunt interview published Friday in the weekly Panjereh. Iranian conservatives, including Mr. Ahmadinejad’s group, prefer the term “principalism” to “fundamentalism.”
The strikes that broke out in the Tehran bazaar last week, while provoked by a proposed income tax increase, reflect the growing rift between the conservative factions, with the merchants, or bazaaris, on the side on the traditionalists.
Mr. Ahmadinejad has often fed the traditional conservatives’ fears; he has referred to the divide among conservatives, warning that “the regime has only one party” in a speech published Monday on his official Web site that provoked outrage among his conservative rivals.
“I think we are seeing a kind of Iranian McCarthyism, with Ahmadinejad disposing of all the people who are not with him by accusing them of being anti-revolutionary or un-Islamic,” said an Iranian political analyst, who refused to be identified for fear of retribution.
In a sense, the power struggle among conservatives is a return to the status quo before last year’s presidential election, which unleashed the worst internal dissent Iran has experienced in decades. The street protests were widely seen in the West as a fundamental challenge to Iran’s theocracy. But after a year in which outpourings of public anger failed to effect tangible change, the dust has settled to once again reveal a more basic split within Iran’s political elite.
The rift is partly a generational one, with Mr. Ahmadinejad leading a combative cohort of conservatives supported by Iran’s elite Revolutionary Guards. On the other side is an older generation of leaders who derive their authority from their links to Ayatollah Ruhollah Khomeini, the leader of Iran’s Islamic Revolution in 1979. Reformist lawmakers now represent a largely impotent minority in the Parliament.
“Ahmadinejad wants a new definition of conservatism,” the political analyst said. “He wants to say that we are the true conservatives and not you anymore.”
The older conservatives, including clerics, lawmakers and leaders of the bazaar, which is the center of Iran’s ancient system of trade and commerce, have long questioned Mr. Ahmadinejad’s competence and even accused his ministers of corruption. But recently they have gone further, accusing Mr. Ahmadinejad’s faction of distorting the principles of the Islamic Revolution and following a messianic cult that rejects the intermediary role of the clergy.
To some, those criticisms amount to a veiled plea by the old-line conservatives to Iran’s supreme leader, Ayatollah Ali Khamenei, to rein in the president or even to remove him.
The divisions erupted last month when conservative members of Parliament voted to block Mr. Ahmadinejad’s efforts to seize control of Iran’s largest academic institution, Azad University, which has campuses throughout the country and enormous financial assets. The university was founded by Ali Akbar Rafsanjani, a former president and one of the central figures among traditional conservatives. After the vote, a spokesman for Mr. Ahmadinejad declared that the lawmakers had “aided the conspiracy,” a phrase often used against street protesters and terrorist groups.
The next day, a government-backed demonstration formed outside the Parliament building, with protesters denouncing Ali Larijani, the speaker of Parliament and a conservative rival to Mr. Ahmadinejad. “We will reveal the treacherous MPs,” read one poster shown in pictures published by ILNA, a semiofficial Iranian news agency. In Qum, pro-government students distributed leaflets saying “Mr. Larijani, give us back our vote, you no longer represent us.”
Mr. Larijani struck back, deriding his critics as “impudent, without logic and controversy mongers.”
Ayatollah Khamenei has tried to appear neutral in the university dispute, issuing orders to Mr. Ahmadinejad and Mr. Rafsanjani that both sides should suspend efforts to make changes to the university’s charter.
Enlarge This Image
European Pressphoto Agency
President Mahmoud Ahmadinejad, second from right, and former President Ali Akbar Rafsanjani, left, lead feuding factions.
Related
Toll Rises From Twin Suicide Bombings at Iranian Mosque (July 17, 2010)
Times Topics: Mahmoud Ahmadinejad | IranConservative rivals of Mr. Ahmadinejad are fighting back, publicly accusing him of sidelining clerics and the Parliament, pursuing an “extremist” ideology, and scheming to consolidate control over all branches of Iran’s political system.
“Now that they think they have ejected the reformists, maybe they think it is time to remove their principalist opponents,” said Morteza Nabavi, the editor of a mainstream conservative newspaper, in an unusually blunt interview published Friday in the weekly Panjereh. Iranian conservatives, including Mr. Ahmadinejad’s group, prefer the term “principalism” to “fundamentalism.”
The strikes that broke out in the Tehran bazaar last week, while provoked by a proposed income tax increase, reflect the growing rift between the conservative factions, with the merchants, or bazaaris, on the side on the traditionalists.
Mr. Ahmadinejad has often fed the traditional conservatives’ fears; he has referred to the divide among conservatives, warning that “the regime has only one party” in a speech published Monday on his official Web site that provoked outrage among his conservative rivals.
“I think we are seeing a kind of Iranian McCarthyism, with Ahmadinejad disposing of all the people who are not with him by accusing them of being anti-revolutionary or un-Islamic,” said an Iranian political analyst, who refused to be identified for fear of retribution.
In a sense, the power struggle among conservatives is a return to the status quo before last year’s presidential election, which unleashed the worst internal dissent Iran has experienced in decades. The street protests were widely seen in the West as a fundamental challenge to Iran’s theocracy. But after a year in which outpourings of public anger failed to effect tangible change, the dust has settled to once again reveal a more basic split within Iran’s political elite.
The rift is partly a generational one, with Mr. Ahmadinejad leading a combative cohort of conservatives supported by Iran’s elite Revolutionary Guards. On the other side is an older generation of leaders who derive their authority from their links to Ayatollah Ruhollah Khomeini, the leader of Iran’s Islamic Revolution in 1979. Reformist lawmakers now represent a largely impotent minority in the Parliament.
“Ahmadinejad wants a new definition of conservatism,” the political analyst said. “He wants to say that we are the true conservatives and not you anymore.”
The older conservatives, including clerics, lawmakers and leaders of the bazaar, which is the center of Iran’s ancient system of trade and commerce, have long questioned Mr. Ahmadinejad’s competence and even accused his ministers of corruption. But recently they have gone further, accusing Mr. Ahmadinejad’s faction of distorting the principles of the Islamic Revolution and following a messianic cult that rejects the intermediary role of the clergy.
To some, those criticisms amount to a veiled plea by the old-line conservatives to Iran’s supreme leader, Ayatollah Ali Khamenei, to rein in the president or even to remove him.
The divisions erupted last month when conservative members of Parliament voted to block Mr. Ahmadinejad’s efforts to seize control of Iran’s largest academic institution, Azad University, which has campuses throughout the country and enormous financial assets. The university was founded by Ali Akbar Rafsanjani, a former president and one of the central figures among traditional conservatives. After the vote, a spokesman for Mr. Ahmadinejad declared that the lawmakers had “aided the conspiracy,” a phrase often used against street protesters and terrorist groups.
The next day, a government-backed demonstration formed outside the Parliament building, with protesters denouncing Ali Larijani, the speaker of Parliament and a conservative rival to Mr. Ahmadinejad. “We will reveal the treacherous MPs,” read one poster shown in pictures published by ILNA, a semiofficial Iranian news agency. In Qum, pro-government students distributed leaflets saying “Mr. Larijani, give us back our vote, you no longer represent us.”
Mr. Larijani struck back, deriding his critics as “impudent, without logic and controversy mongers.”
Ayatollah Khamenei has tried to appear neutral in the university dispute, issuing orders to Mr. Ahmadinejad and Mr. Rafsanjani that both sides should suspend efforts to make changes to the university’s charter.
Subscribe to:
Posts (Atom)