What a Difference a Year Makes

2010 April 25
by Dave

While I am still unconvinced of the equities markets rallies’ sustainability, I am a new convert to the notion that consumer spending gains, unlike home price gains, are real and not a chimera conjured by government cash and incentives. Even though US consumer spending will not reach the heights it saw in 2007 any time soon and thusly will not be the engine for growth that it once was, it’s slow but steady upward trek will be key to American economic recovery.

I spent a weekend in Las Vegas in late winter 2009. It really hammered home how bad the economy was doing. The crowds were the least dense that I have ever seen, and the shopping venues were deserted despite massive markdowns everywhere. The stats show how grim it was. You have to go back to 2003 to find a year with fewer visitors than 2009, and in 2003 there were only 87% as many hotel rooms in Las Vegas as there were in 2009.

I just spent this last weekend in Vegas and it felt like 2007 again. Long lines at the taxi stands, heavy traffic all over the strip and people in the stores were the most noticeable signs that money is flowing again. Another difference is last minute room rates. If you book early they are comparable to where they were in 2009, but last year I checked the rate the week before my trip and was able to get my reservation price knocked down to match the current listed price for the upcoming weekend. When I checked this last week to see if they had changed, prices had more than doubled from my reservation rate.

I think people’s willingness to get out of town and spend money on vice and fun speaks deeply to consumer sentiment. People don’t think that the world is ending any more and that confidence seems deeply entrenched enough that it will take a pretty big shock to knock it down again. The giant party is back. It is still probably not as loud as it’s peak, but at least it is once more able to be heard.

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