Desperate retailer, meet the penny-pinching consumer

We've hit the bottom of the spending decline, say hopeful Minnesota retailers. But even the most upbeat merchants know it'll be a slow road back.

The worst recession in decades is driving people to save and not spend. The latest Federal Reserve data show big drops in consumer debt during the summer and over the past year. It's unclear if it's a permanent shift. But it will still be hard this holiday season to convince consumers to spend like the recession's over.

That includes Anne Holmboe, a source in MPR's Public Insight Network, who told us recently, "Our current goal is to get our debt paid off by the end of the year so we can start to save again next year."

Holmboe, lives in Minneapolis with her husband and feels as though they are just getting by. Holmboe works as a nanny, but has taken a part-time job to supplement her income. Her husband has done the same. The extra money is going for one thing: Paying off the credit card bills.

Greg Boettner of Scandia says he's stopped impulse buying and researches everything now online before buying. He, too, has paid down a considerable credit card debt.

Losses in the stock market ate into Boettner's retirement savings. So the 59-year-old is working on one thing -- preparing for retirement.

"My new motto is to save first and spend only when I have to, only on items I need," Boettner, a network source, said.

This more frugal approach is the reality facing retailers, says Bruce "Buzz" Anderson, president of the Minnesota Retailers Association.

"Both you and I have never gone through a downturn this steep," Anderson says. "And so people are still really hanging on to their dollars right now. For how long? We just don't know that."

Minnesota retailers, he adds, are seeing consumers "break loose a little bit" and spend some money. And stores are getting aggressive to lure shoppers in with sales and with marketing.

Anderson also thinks people like Holmboe and Boettner -- the ones who are saving and paying down on debt -- will be good for retailers in the long run. The eventual gain in financial security will eventually translate into a desire to spend again.

"It's just going to have to take some time," he said.

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