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Signs show economy still in flux

Business owners are still looking for rebound

Posted: June 29, 2009 10:19 p.m.
Updated: June 30, 2009 4:55 a.m.
 
From car washes to restaurants, service businesses are feeling the economic crunch.

Over the past year, car-washing businesses across the state have seen a major shift, said Randy Cressall, owner of Valencia Chevron Auto Spa.

He said of the 35 million registered vehicles in California, 3.5 million are being washed at home, according to a study carried out by the International Carwash Association.

Of the motorists who do still come to the Auto Spa, he said many are coming in less frequently and are opting for the less-expensive express-wash, vacuum-it-yourself service.

Cressall said he's had to respond to the slowdown by tightening the business' financial belt and eliminating some staff.

The local businessman is confident things are starting to turn around, though.

"People are getting tired of washing their cars at home," he said.

No one knows when American consumers will feel financially secure enough to return to old spending patterns. But those whose livelihoods depend on it - shop owners, restaurant managers, hotel staff - 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.

When it comes to Salt Creek Grille in Valencia, co-owner Greg Amsler said he's seen definite changes in menu choices.

While diners at the upscale eatery still order higher-priced steak and seafood entrees, he said they're cutting back on appetizers, salads, desserts - even bottled water.

"Bottled water sales are way down," he said, and added most diners simply opt for tap water.

He said the frequency with which people visit Salt Creek has remained about the same.

"If you like filet, you're going to go out for filet," he said.

Amsler said he first noticed a downturn in business at the end of 2007, followed by a brief resurgence and then a drastic drop in September 2008 that lasted through last April.

"We've seen an uptick since tax day," he said. "Maybe people are making the same amount but they feel better."

Amsler said he's hopeful the turnaround will continue.

"I don't expect a rubber-ball-bounce rebound," he said. "I think it will be a slow growth."

Taken together, these seemingly minor transactions will likely help lift the U.S. out of its longest recession since World War II.
Consumer spending makes up about 70 percent of economic activity.

But May data, released Friday, shows 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.

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, vans, sport utility vehicles and pickups. Those sales were running at an annualized rate of 9.9 million units through May.

Taylor says sales need to rise to an annualized total of 10 million to 11 million units to signal that consumers are spending freely again.

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.

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