Consumer spending habits show tough times

It may be hard to believe, but old-style businesses like shoe repair shops are thriving in the new global economy.

"We've got four employees and we're working every day," said Joe Duran, from The Master Cobbler.

Business is booming at The Master Cobbler shoe repair store in San Jose, thanks to rising gas prices.

A new survey by Nielsen Company shows two thirds of consumers are cutting spending due to rising gas prices. That's up 18-percent from a year ago.

That means people are fixing up the old and saving money by not spending cash on the new.

"I spent $30 having these polished and refurbished and each of these shoes, you'd have to pay maybe $60 a pair," said Carol Bunn, from Cupertino.

Sales of store brand grocery items are up more than nine percent this year and the reason is obvious. For example, the price of this jar of Safeway brand creamy peanut butter costs $1.99, and this jar of Skippy creamy peanut butter costs $3.69.

Store brand milk and cheese are also seeing a big increase in sales because of soaring inflation on dairy products. During a slowing economy it pays to be a discounter. Sales rose 5.1 percent in June and nine percent at wholesale clubs like Costco and Sam's Club. Wal-mart posted its best June performance since 2002. However, it's a June gloom for department stores. Year-to-year sales dropped 4.1 percent.

Lili Matthews is sending a son to private school and high gas prices are now a fact of life. So for the first time ever, she brought her daughter, Tara, to Crossroads Trading Company, a new and used clothing store instead of the mall.

"We are spending a lot more in gas. We have two cars," said Lili Matthews, from San Jose.

The question is will these new spending habits stick for people like Lili?

Many economists believe the current conditions will last well into next year and some of the frugality will stay. Regardless for Pedram Ibrahimi, if gas prices drop, so will his new bike riding habit.

"It's good exercise but I'd rather be driving going from one place to the other than taking twice the time," said Ibrahimi.

It's a new economy, but it may take a long time before people drop old habits.

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