Consumers Are Anxious—but Shopping

If you ask Liz McDermott about the economy, she’ll say she’s worried about the wild gyrations of the stock market, the budget impasse in Washington, and the European bank crisis. If you ask her about shopping, she’ll tell you about the Manolo Blahnik alligator slip-ons she bought at Neiman Marcus in September for $3,000, the $2,000 she dropped on a silk pantsuit from Ralph Lauren, and the $6,000 she paid for four dresses at Michael Kors. “In 2008 I stopped spending and went under the radar,” says McDermott, who runs an interior decorating company in Atlanta. “Now I think we have all come to terms with the economy, and we understand our limitations.”

Like many Americans, McDermott has an urge to shop that’s overriding her anxiety about the economy. While household sentiment stands at levels typically seen during a recession, increased spending in the third quarter boosted growth to the highest level of the year, Commerce Dept. figures show. Total consumer spending, which accounts for about 70 percent of the U.S. economy, rose 2.4 percent last quarter, the fastest this year. Retail sales increased 1.1 percent in September, the most in seven months, and vehicle sales climbed 3.6 percent, the most since March 2010.