The soaring stock market last year boosted the spirits of high-income consumers and helped open their wallets. Wall Street's latest plunge and the continuing fear of a financial meltdown in Europe can just as quickly send them running for cover.
Penny Gilbert, 44, of Sherman Oaks said that what happens in Europe and in the stock market over the next few weeks would determine whether she and her family vacation in Hawaii this summer or take a trip closer to home, such as to the Grand Canyon.
"I'm very leery about the future," she said. "That was scary last week when it dropped 1,000 points for no reason," referring to the brief plunge May 6 in the Dow amid rapid-fire electronic trading and widening financial turmoil in Greece.
Last summer the Gilberts, who have two children in private school, were afraid to go anywhere and spend money, she said. Gilbert works part time as a research consultant. Her husband is a lawyer. "We stay-cationed," she said.
Now, having recouped some of their stock losses and with home prices in their community stabilizing, Gilbert is getting ready to plow as much as $20,000 into repainting their house and buying a new air conditioning and heating system.
"I haven't seen any more foreclosures in our area," she said.
In American Express' monthly "Spending & Saving Tracker" survey, 70% of homeowners with incomes of $100,000 or more said in April that they were planning home improvements this year, spending an average of $11,500. That's about double the amount lower-income homeowners plan to spend.
In fact, Labor Department surveys show that the top 20% of U.S. households in income account for about 40% of all spending.
In recent months, the wealthiest Americans apparently have been driving an even more disproportionate share of consumption.
According to estimates from Economy.com, they've also contributed an outsized share of the corresponding decline in saving, which has worried some analysts and policymakers. After rising to about 5% in the second quarter of last year, the personal savings rate fell below 3% this spring.
Economists said it's common for affluent consumers to lead the spending in a recovery, but it's crucial that greater prosperity spread to the rest of the population.
