Shoppers spent more at small retailers in Sept

Shoppers spent 5.6 percent more at small retailers during September than last year, which represents the slowest year-over-year growth so far in 2012 as the tough economy weighs on Americans.

When they do pull out their wallets, shoppers are focused. In August the back-to-school season gave a boost to clothing sales. An improved housing market helped sales at hardware, furniture and other housing-related stores during September. But last month, people spent less on auto parts and services, as they cut back on driving or bought new cars.

Shoppers cut back severely during the recession and have been slow to increase spending at both small and big retailers. A report released Monday by MasterCard Advisors and WellsFargo found that the consumer psyche still needs time to recover. Experts will be paying close attention in coming months to see how shoppers spend their money during the holiday shopping season which can be critical to the survival of retailers of any size.

"The overall trend has been one of improvement, but it's been too gradual for anyone's satisfaction," said Marc Bernstein, head of small business at Wells Fargo. "It's going to be a long time until small businesses feel comfortable again. "

Small retailers are a critical part of the economy and account for more than $100 billion in sales every month in the U.S. The SpendingPulse report measures sales at retailers with annual revenue of less than $35 million and fewer than 200 employees.

The report found that the 5.6 percent gain is down from a 6.8 percent rise in August. However, spending at small businesses remains ahead of overall U.S. retail growth by 1.5 percent. Michael McNamara, global solutions leader for MasterCard SpendingPulse, explains that small retailers were hit harder during the recession and began their recovery later than their bigger brethren.

The report found an overall 5.6 percent gain for the month. It was up 5.2 percent after gasoline and auto sales were stripped away. Excluding food service sales as well, the measure was up only 4 percent, as higher food prices drove some gains.

"It's not that things are great, but they are kind of chugging along," McNamara said.

Bernstein and McNamara said they are concerned with how rising gasoline prices, the weather and the presidential election may affect consumer psyches. They also are closely watching what impact the potential "fiscal cliff" may have on shoppers. Fiscal cliff is a term used to describe looming tax increases and deep spending cuts that will happen unless Washington lawmakers resolve a deadlock over the budget.

Bernstein and McNamara remain optimistic that some of the worst times are behind small businesses.

"Small businesses are scrappy," McNamara said. "The ones that have succeeded this far have adjusted and will continue to adapt."

MasterCard and Wells Fargo compile their figures from payments made through the MasterCard processing system as well as estimates of other types of payment, including cash and checks. The sales come from more than a million retail locations. The companies then use those numbers to project estimates for small businesses spending overall, not just transactions involving MasterCard.

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