What will signal consumers are back? Check spas

WASHINGTON (AP) — Dayne Morris eats out less, cooks at home more. He hunts for online bargains and shops at discount stores.

So when will he start spending freely again? “When I get a promotion,” says Morris, 24, a business consultant in Washington, D.C., “and the economy turns around.”

What used to be an afterthought, from ordering wine with dinner to jetting off on a resort vacation, still feels like a splurge.

No one knows when 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. Spas will sell more facials and massages.

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

But May data 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.

That’s hardly good news for small-business owners such as Troy Little, who runs 27 convenience stores in Tucson, Ariz., and is waiting to see more impulse purchases at the register.

Tucson has been battered by the housing bust, which wiped out construction jobs with it.

“That lunch-bucket guy is my bread and butter,” says Little, president of family-owned Quik Mart Stores. “He’ll grab a doughnut in the morning, snacks for lunch and smokes at night. That guy is gone. In our marketplace, I think we have a long, rough road ahead of us.”

When more of his cost-conscious patrons splurge on the Lumberjack Slam — a feast of pancakes, ham, bacon, sausage, eggs and hash browns — Denny’s CEO Nelson Marchioli will smile more.

“When the economy gets better, people will start buying the Lumberjack breakfast again and more appetizer samplers,” Marchioli says.

Some merchants who cater to higher-end customers say they already see signs of improvement. Helen Kim, director of operations for the upscale National Jean Co., which runs 12 boutiques nationwide, is one of them.

“Some are splurging,” Kim says. They’ll buy the third pair of jeans in a different color. They’ll get the second outfit now.” The average price of jeans in the store: $170.

The merchants on the front lines will see the smaller telltale signs. Zane Tankel, owner of more than 30 Applebee’s franchises in the New York area, says he’ll be looking for customers to order complete meals — appetizers, entrees and desserts — as well as drinks such as iced tea or soda.

For now, he’s taking heart that the worst seems over. Now, at least, diners are “ordering more higher-end things like a steak as opposed to a burger and fries and just a salad. Those are early indications. Whether they stick or not, I’m not sure.”

Denny’s Marchioli says he’ll be looking for customers to buy traditional dinner items at dinner time, rather than the cheaper breakfast-style food that’s sold all day. He’ll also be watching for fewer people — especially older customers on fixed incomes — to split a single meal.

Todd Walter, chief executive officer of Red Door Spa Holdings, knows what to look for: Customers splurging again on facials and massages, rather than sticking with “maintenance” services such as haircuts, color and waxing.

He’ll also be watching for first-time customers, of whom there’s been a “fairly significant falloff” during the recession.