- The Washington Times - Sunday, June 28, 2009

Dayne Morris eats out less, cooks at home more. He hunts for online bargains and shops at discount stores.

So when will he start spending freely again? “When I get a promotion and the economy turns around,” said Mr. Morris, 24, a business consultant in Washington.

What used to be an afterthought, from ordering wine with dinner to jetting off to a resort vacation, still feels like a splurge. No one knows when consumers will feel financially secure enough to return to old spending patterns, but those whose livelihoods depend on it — shop owners, restaurant managers, hotel staffers — will be among the first to see the shift.

Diners will order big pancake breakfasts again. Business suits will sell briskly. So will name-brand luggage, gym memberships and pricey jeans. Spas will sell more facials and massages.

Taken together, these seemingly minor transactions will likely help lift the country out of its longest recession since the Great Depression. Consumer spending makes up about 70 percent of economic activity. But May data, released Friday, show that a boost in income from the government’s stimulus program was devoted more to saving than to spending. Americans may be spending a bit more than they did at the end of last year, but it’s still far less than needed for a vigorous economic recovery.

Some merchants who cater to higher-end customers said they already see signs of improvement. Helen Kim, director of operations for the upscale National Jean Co., which runs 12 boutiques nationwide, said: “Some [customers] are splurging. They’ll buy the third pair of jeans in a different color. They’ll get the second outfit now.” The average price of jeans in the store: $170.

More typical of retailers, though, is Joe Kanawati, owner of the Men’s Shop in Arlington, whose customers include government workers and business travelers and who laments sales are still “the worst I’ve seen in 42 years.”

“When they are back buying business suits and slacks, that will be good,” Mr. Kanawati said.

Broader economic signs will help make the case, too. Paul Taylor, chief economist at the National Automobile Dealers Association, looks at sales of new cars and vans, SUVs and pickups. Those sales were running at an annualized rate of 9.9 million units through May. Mr. Taylor said sales need to rise to an annualized total of 10 million to 11 million units to signal that consumers are spending freely again.

Zane Tankel, owner of more than 30 Applebee’s franchises in the New York area, said he’ll be looking for customers to order complete meals - appetizers, entrees and desserts - as well as drinks such as iced tea or soda.

For now, he’s taking heart that the worst seems over. During what seemed the depth of the recession, Mr. Tankel said, “We saw people tended to scan the menu more for the less-expensive item.”

Iced tea and soft drinks with meals “just disappeared,” he said. “Appetizers were nonexistent unless you got a group and they shared platters. Desserts disappeared.”

Now, at least, diners are “ordering more higher-end things like a steak as opposed to a burger and fries and just a salad,” he added. “Those are early indications. Whether they stick or not, I’m not sure.”

Todd Walter, chief executive officer of Red Door Spa Holdings, is looking for customers splurging again on facials and massages, rather than sticking with “maintenance” services, such as haircuts, color and waxing. He’ll also be watching for first-time customers.

Another item on his watch list: a rebound in sales at resort spas, which were hurt more than spas at other locations as people cut back on vacation travel.

Michael Movahedi, owner of Signature Leather and Travelware in Arlington, said he wants to see people once again buying name-brand luggage.

“When the economy was good, people would buy to impress. They’d get a really fancy bag and toss the other one. It will be a good sign when people ask me, ‘Can I leave my old luggage here?’ ”

Economists, meanwhile, are monitoring overall consumer spending, which rose at a 1.4 percent annual rate in the first three months of this year. That was a sharp reversal from the 4.3 percent annualized drop in the fourth quarter - which was the steepest in 28 years. Once quarterly spending starts logging at least 2.5 percent growth for three straight quarters, it would suggest consumers are truly back, analysts say.

Mack Payne hopes to be one of them. Until a few months ago, Mr. Payne, 35, of Washington, was “spending money like no tomorrow.”

But after being laid off from his job at a gym, Mr. Payne is on a tight budget. And that won’t change until he finds a new job, he said.

“My mother always said, ‘Save for a rainy day,’ ” he said. “The rainy day is here.”

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