Welcome to the Sunday recession news roundup. Today, we have a theme: frugal consumer spending. How is tightening consumer spending affecting the market, and who are the winners and losers of this change in behavior? Without further ado, the roundup:

• Wise Bread: Does Frugality Hurt the Economy? - Remember those rebate checks? The point was to increase consumer spending, specifically discretionary spending. But most put their rebate checks towards their bills or towards savings, as a part of smarter and more frugal spending. But Brewer asks: Is this hurting the economy? Is it better for us to spend rather than save? In his opinion, there are indeed downsides like less money spent in the economy, but frugal spending causes less fear about recession and more economic stability. His rationale is not all that impressive, but his argument has merit: smarter spending, in my opinion, means more innovation to create smarter, cheaper, and better products. This in turn creates new market opportunities and new job creation. Coupled with less debt, a more frugal economy would be more efficient and more innovative.
• Wal-Mart had a strong report recently, but Target did not. The rationale according to 24/7 Wall Street? Consumers turn to Wal-Mart when they are penny pinching. Wal-Mart indeed seems poised to benefit from a recession. As a result, the stock’s jumped 21% this year.
• Google CEO Eric Schmidt doesn’t think we’re headed for recession. People have asked if the tech sector is “recession-proof” (no, it isn’t), but Google has fared pretty damn well in recent weeks. A good deal of large businesses are not as worried about the economy’s condition as they see positive signs come to light.

Overall, consumers are more pessimistic than businesses over the economy’s condition. That’s why consumers have tightened spending. But certain companies and markets are winners and losers. Internet advertising is a winner (it better targets consumers for cheaper), while traditional print and television advertising is more likely to lose. Wal-Mart and discount chains are winners, while moderate and high-end stores are more likely to be losers. The question is how long consumers will spend frugally and by how much will they change their lifestyle.

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79%, to be precise, believe we’re in a recession now. According to the CNN/Opinion Research poll, this is up from 46% six months ago and 2/3rds of respondents back in February.

This is in contradiction with the technical definition of a recession, which is two quarters of negative GDP growth (simplified: the economy shrinks twice in a row). It grew last quarter, but only by 0.6%. Still, that’s growth, and it means we’re in a slowdown, not a recession.

So why does perception beat reality? Is it just a misunderstanding of the definition. No, I think this quote from the CNN piece sums it up pretty well:

“You probably don’t have 79% of economists saying that we are in a recession,” said Jeoff Hall, chief U.S. economist for Thomson Reuters. The country has “lost 260,000 jobs (in the first 4 months of 2008), so for those people it is not a recession, it is a depression.”

It’s about personal impact. And right now, high gas prices, job cuts, and uncertainty are playing their role. Perception can sometimes be stronger than reality. And sometimes, I think we need to change the definition of recession.

Two questions for the readers out there: Do these numbers surprise you? And do you think we should look into how we define a recession? Voice yourself by posting a comment!

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