A record quarterly increase of 14.0 percent in durable goods purchases since the Great Recession was reported today by the U.S. Department of commerce. During the Great Recession, consumers cut back on purchases of durable goods, such as cars, furniture and appliances, in a phenomenon known in behavioralogy as “Durable Diet”. The second quarter growth of 14.0 percent in durable goods spending indicates that consumers are off their “durable diet” due to lower level of money anxiety.
About half of the 14.0 percent increase in durable goods spending was on automobiles followed by noticeable increases in purchases of furniture and appliances. The second quarter increase is in sharp contrast to the height of the “Durable diet” period in the fourth quarter of 2008, when consumer spending on durable goods declined 25.8 percent in response to an increase in consumers’ level of money anxiety.
The link between the level of money anxiety among consumers and their spending on durable goods is clearly demonstrated in the book Money Anxiety. During the 2008-2009 recession, when the Money Anxiety Index reached a high of 94.4, consumers reduced spending on durable goods by as much as 16.3 percent. In contrast, during the second quarter of this year, the level of money anxiety subsided to 71.3 promoting consumers to get off their “durable diet” resulting in an increase of 14.0 percent in purchase of durable goods.