Americans spending less, but there's pent-up demand for home improvements

The latest study from RICKI, the Research Institute for Cooking & Kitchen Intelligence, indicates most American consumers are keeping their pocketbooks tightly zipped (79 percent have cut their spending), but many look forward to cutting loose once the recession eases.

A majority of the 1,510 U.S. consumers who participated in the nationwide RICKI study describe the nation’s economy as "not so good" (50 percent) or "poor" (43 percent). And while half think the economy will improve this year (15 percent) or next (36 percent), the other half think the turnaround won’t happen until 2011 or later, though recent news reports suggest this attitude may be changing for the better. Feelings about when the economy will improve do not vary significantly by age, income or other demographic characteristic.

But consumers are more positive about their own personal finances, with more than four in 10 describing the state of their personal finances these days as "good" (43 percent) or "excellent" (3 percent). Only 14 percent describe it as "poor." Perhaps not surprisingly, the feeling about one’s personal finances is closely associated with their household income level – those with lower incomes (HHI less than $50,000) are more likely than their wealthier counterparts to describe their personal finances as "poor."

Even though consumers feel that their personal finances are in better shape than the national economy, they have felt squeezed as a result of the economic downturn. Almost a third of respondents said the current economy is having a "major impact" on them and half of them say it has had just "some impact."

Other than the economy in general, consumers are concerned most about health care/health insurance costs (31 percent), the loss of value of investments (29 percent) and the cost of groceries (28 percent), followed closely by the fear of losing a job (25 percent) and energy costs (23 percent). In response to these concerns, half or more are eating out less (61 percent), shopping less (57 percent), clipping coupons more (52 percent) and going out less often for entertainment (49 percent).

“Clearly most people are hunkering down for now, even those with money,” says Brenda Bryan, RICKI’s Executive Director. “Still, there are signs that there is pent-up demand out there and that once the recession ends, some people will be more than ready to spend on certain big-ticket items. And according to the RICKI survey, even in this tough current economic climate, some consumers are still planning to take trips and make large purchases this year.”

One thing is crystal clear: Americans need a break. The number-one area for spending plans this year is for a vacation. Over a quarter of consumers (28 percent) say they plan to take a vacation where they will spend at least three nights in a hotel.

Other spending plans for 2009 include a home improvement project costing $1,000 or more other than kitchen or bath remodel (13 percent), new furniture costing $500 or more (9 percent), a new car (8 percent) and TVs costing $500 or more (8 percent). Fewer than one in ten plan to remodel a kitchen (4 percent) or bath (6 percent) or add an outdoor kitchen (1 percent) this year.

“For kitchen remodeling specifically, the four percent who are planning to do this project in 2009 equates to about half as many as were completed in 2007,” according to Bryan. “Competition will be intense for this smaller consumer pool in the coming months.”

On the other hand, sizeable numbers had planned expenditures this year but changed their minds, most for financial reasons. Mentioned most were vacations (22 percent postponed), new cars (17 percent) and home improvement projects other than a kitchen remodel (15 percent), bath remodels (6 percent) and kitchen remodels (5 percent). This is an indication of pent-up demand for these activities.

Yet the slowdown in the economy has resulted in a higher level of activity in kitchens in some ways. Consumers report they are preparing meals at home more these days and using a computer in the kitchen more, for example. However, there has been a dropoff in entertaining in the kitchen, which is associated with a reduction in entertaining in general.

Looking forward, only two in ten consumers (20 percent) are completely happy with their kitchens. Eight in ten (80 percent) would like to change their kitchens (42 percent would change a few things in their kitchens, 19 percent would change a lot, and 19 percent would completely redo their kitchens).

“So we do see glimmers of good news, including some pent-up demand for a variety of products, including kitchen remodels. Women and younger people (aged 18 to 44) are more likely than men and older people to say they want to completely redo their kitchens. It’s encouraging to see people still thinking about their kitchens and ways to make them look better and work better for them," says Bryan. “And when we asked what might encourage people to make purchases for their kitchens now, we heard lots of ideas that might motivate people to buy now. Just one is the suggestion of holding contests. Relating back to the findings from the study, perhaps a contest giving away an all- expenses-paid vacation would be a good idea!”

Methodology: The Economy & Kitchens: Sizzle or Fizzle? was conducted online among American consumers aged 18 and older from March 14 to April 3, 2009. A total of 1,510 consumers participated in the study. The study was conducted in partnership with StartSampling, a leading national online panel company headquartered outside Chicago.

About RICKI: The Research Institute for Cooking & Kitchen Intelligence (RICKI) is an independent, membership-based organization of manufacturers, retailers, wholesalers and publications whose revenues come from sales related to activities that take place in the kitchen, including kitchen remodeling. Find out more at www.kitchenintelligence.org.