While taxes have been raised this year, “we have planned accordingly,” she said. “I have budgeted for it. I love to ski -- and I am not a big spender.”
One reason purchases are likely to hold up in the face of higher taxes is that affluent consumers, who make up a disproportionately large share of spending, tend to trim savings rather than consumption when faced with such constraints, economists at UBS Securities LLC said. They estimate the top 1 percent of income earners put 51 cents of each dollar toward savings, allowing plenty of leeway to keep spending.
Recent data show this is already happening. Consumer spending rose in January even as incomes dropped by the most in 20 years, pushing the saving rate to a five-year low.
Business Fortress
Like households, companies are in better shape than they were a few years ago to ride out the drag from the $85 billion in across-the-board budget cuts, known as sequestration, that began this month. “Businesses have fortress balance sheets,” Sinai said.
Profits for corporations in the S&P 500 index climbed to a record $100.75 a share in 2012, and will exceed $120 a share next year, double the $60.43 seen in 2008, according to Wall Street estimates compiled by Bloomberg.
The cash is stoking investment as corporate confidence and demand improve. Orders for non-military capital goods excluding aircraft, a proxy for future business spending on equipment and software, climbed 7.2 percent in January from the prior month, the biggest gain since September 2004. They’re up 9.8 percent since November, the most for a three-month period since 1993.
‘Opportunities Abound’
“We will keep our foot to the floor and will almost certainly set still another record for capital expenditures in 2013,” Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., wrote in an annual letter to shareholders posted online March 1. “Opportunities abound in America.”
Buffett said his Omaha, Nebraska-based company last year spent $9.8 billion, an increase of about 19 percent from 2011, on plants and equipment as he bolstered railroad and utility units.