Frugality Making a Come Back?

While reading through my long list of online news sources I found an interesting article that I felt merited some further analysis and discussion.  The article Why America Has Too Many Stores from Slate.com talks about overbuilding and dropping consumer spending in the retail sector.  In real dollars, after adjusting for inflation, sales were down over 2007 for the first time in years.  At the same time, strip malls and shopping plazas have sprouted up all over the cityscape (and Main Street USA too).

I can certainly see this trend in our neck of the woods.  My wife started working a part time retail job at a brand new upscale development when it opened back in December.  This complex has about 60 high end stores like Lucky Jeans, J.Crew, and Anthropologie.  While visiting my in-laws over the weekend we noticed that a new collection of big box stores anchored by a Super Target and Circuit City that popped up a few miles from their house too.  There were also several other large retail projects along the inter-state that we drove past during our trip which have all been completed in the last two and half years since I started regularly driving the route to their house.  I'm sure that something has to give, either the consumer gives in to the temptation or there will be a massive overstock of retail space. 

Aside from making me reluctant to sink any cash into commercial or retail focused REITs, the ultimate take away from the piece was a question of whether frugality might be due for a resurgence.   The popularity of personal finance blogs and the host of books rail against consumerism makes me think there may be something of a sea change coming in the spending habits of many Americans.  The Freegan movement seems to be an extreme anti-consumerism response that even seems to be gaining ground (and press coverage). 

The article seems to doubt the staying power of the trend in reduced retail buying stating, "The eleva­tion of frugality into a virtue seems likely to last about as long as modern recessions do—about eight months."  What struck me most about this quote is the idea of frugality as a virtue which certainly fits with the current trend I've seen in the blog-o-sphere.  The Boy Scouts (I'm an  Eagle Scout) may have something with the inclusion of "Thrifty" in the Scout Law.  I fully support the spreading frugality and thrift and indeed elevating it to the level of a virtue.

While I don't see a sweeping change that will fundamentally change the wider economy, an eight month breather seems too conservative an estimate of the impact of these changes.  If an additional 10% of the population increased their cash savings rate (which is near zero) up to 10% it would decrease GDP by as much as $93.8 billion a year.  That is only 0.7% of the total economy but it isn't a trivial sum either.  The survivors of the Depression were fundamentally changed for a lifetime, and while I certainly don't want to see that type of suffering ever again, I hope that some of Gen X and Gen Y can permanently incorporate frugality into our lifestyle.

As always, comments are welcomed.