Saying 'No' to Starbucks

Nov. 16, 2007 — -- That high-priced cup of coffee in your hand may say more about the health of the overall economy than your taste in beverages.

Sales of lattes are lagging at Starbucks and, for the first time ever, the company that always claimed it didn't need to advertise much will begin airing television commercials.

In Seattle, coffee prices are up a dime over last year, but that's not the only reason for the drop-off. Economists point to a broader slowdown in consumer spending as the cause.

"Starbucks is really an indicator of how the low to moderate consumer is doing," Patricia Edwards, a portfolio manager at Wentworth, Hauser & Violich, said.

Economists say the spending slowdown is closely linked to mortgage and credit concerns, rising fuel prices and a jittery stock market.

Many retailers are already feeling the pinch -- department stores like J.C. Penney and Kohl's are seeing what they're calling a dramatic weakening in sales.

Consumer confidence has fallen, thanks to high cost of gas and the ongoing mortgage credit crisis. Fed Chairman Ben Bernanke announced to Congress that conditions may worsen before we see any signs of economic relief.

So even if you skip the $4 latte, you'll feel the pinch at the grocery store where milk is up 25 percent and eggs, 41 percent. In fact, the price of an average Thanksgiving dinner has shot up 11 percent -- the biggest jump in 17 years.

From the time you head out the door, rising gas prices have made the trip 39 percent more expensive than last year. The trip home will return consumers to a house that on average is losing value -- down 4.2 percent from last year.