Image: Anderson
Duane Laverty  /  AP
Public relations professional Elizabeth Anderson doesn't regret spending big on shoes and a haircut: "My hair didn't look good, and my feet were hurting."
updated 5/6/2009 6:23:48 PM ET 2009-05-06T22:23:48

As they watched stocks rally last month, Matt Rizzetta and his fiancee Daniela Papandrea loosened up their wedding and home renovation budgets.

They're springing for fancier flowers and seafood as well as chicken. They'll spend two extra days on their honeymoon in Greece. And they're getting granite countertops installed in their kitchen in their new house.

Shoppers tired of fretting about every expense are starting to treat themselves again — albeit just a bit — amid tentative signs that the economy may be stabilizing. These splurges — dining on steak instead of hamburger or buying a coveted handbag — are providing a little relief to businesses that are still suffering as spending remains weak.

"We always were crunching numbers and worrying about every little penny," said Rizzetta, a 26-year-old marketing executive in New York. "It has been somewhat of a relief to spend a little more."

To be sure, these signs of life do not signal a swift turnaround. Job losses keep rising and confidence in the economy remains near historic lows. Some economists even warn of a double-dip recession, with another contraction coming later this year after a brief respite.

Plenty of laid-off workers are still cutting their spending as much as they can. And many experts say people will stick with their new frugal habits even when the economy recovers. Rizzetta says that while they decided to spend more in some areas, he's still cutting back on going out to eat and has decided not to buy a new car.

So even if consumers are feeling flush just for the moment with their tax refunds, stores are hopeful. The Conference Board's consumer confidence figures in April had the biggest jump since November 2005. Warmer weather and a stock market rally have all helped make consumers feel better about spending.

"I have this feeling that people were tired of holding back," said Thierry Beaud, owner of Pistache, a French bistro in West Palm Beach, Fla.

Beaud has seen a rebound in sales of $100 bottles of rare wines since the end of March. His patrons — primarily money managers and stockbrokers — are also switching back to $45 beef tenderloin entrees after switching to roasted chicken and hamburgers since the financial meltdown last September.

Revenues are up just slightly, he said. Still, he added, "I am not planning for an immediate recovery. We are still very cautious about how we are handling our business."

A big clue about how shoppers are feeling will come in the April sales reports, which major retailers release Thursday. They are expected to show less sharp declines at established stores. J.C. Penney Co. has even raised its first-quarter profit outlook twice, saying that business is stabilizing amid better sales in largely discretionary areas like women's apparel and footwear.

Consumer spending grew by 2.2 percent in the first quarter of the year, the government said in late April, the biggest gain in two years. Gallup, which interviews about 1,000 people every day, points to spending stabilizing since February after a precipitous drop since last summer. Shoppers told Gallup they spent $57 on average per day on discretionary items like clothing and gadgets over the most recent 14-day period — a much more stable figure than the $15 to $20 declines in average spending that Gallup had found in recent months.

"If you have kept your job and your income, you are tired of being so frugal," said Marshal Cohen, chief industry analyst at market research firm NPD Group Inc. Foot traffic and purchases are up, he said, citing conversations with stores around the country.

At Buy.com, sales of necessities like replacement printers have given way to items like 52-inch flat-panel TVs and digital cameras from top brands since April 1, said Jeff Wisot, vice president of marketing at the online retailer.

The average selling price of TVs, for example, climbed to $697 last month from $515 in the final three months of 2008. There's been a jump in sales for status-branded pocketbooks like Gucci and Coach compared with the last few months, when customers had focused on generic names.

Shoppers are still being careful with their cash as they cope with the significant economic challenges that persist, but are "reassessing their Herculean efforts of cutting back on everything," said Wendy Liebmann, president of WSL Strategic Retail, a marketing consulting group.

A recent WSL survey found that fewer people were cutting back in 19 out of the 32 merchandising categories it tracks compared with May 2008. While those areas were mainly staples like baby care and skincare and haircare products, Liebmann found that many shoppers were ready to treat themselves to discretionary items like clothes, a vacation or gadgets.

Elizabeth Anderson, who runs a public relations company in Waco, Texas, is still sticking to new habits like shopping for groceries at Wal-Mart rather than pricier local chains and buying store-brand ice cream and sandwich bags for her family.

But tired of $60 haircuts she didn't like and wearing shoes that gave her bunions, she just spent $700 on two pairs of designer pumps and is back with her regular $300 hairdresser — with no regrets.

"My hair didn't look good, and my feet were hurting," said Anderson.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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