Fourth of six parts.

BY TESS NACELEWICZ

Blethen Maine Newspapers

The downturn in the economy has made Mainers more cautious about opening their wallets, and that carries implications for the broader economy.

"As consumption goes, so goes the American economy," according to the Economic Policy Institute, a non-partisan think tank based in Washington, D.C.

Consumer spending has been fueling the nation's economy for decades, but had reached extraordinary levels in the past seven years, the institute says. Between 1947 and 2000, institute figures show, consumer spending averaged 64 percent of the total gross domestic product.

But since 2001, it averaged 70 percent.

That's primarily because, according to the institute, skyrocketing home prices and easy borrowing allowed Americans to use their homes "like an ATM." They withdrew large amounts of equity from their homes to support their buying power.

Now, however, home prices are falling nationally. Banks are less willing to make loans, and mortgage equity withdrawals have been "squelched," the institute says. In consequence, it says, "a drop in consumer spending may not be far behind."

Mainers increasingly are feeling uneasy about spending and the economy, according to a recent survey by Market Decisions, a Portland-based research firm.

The survey, conducted between Jan. 28 and Feb. 25, showed that 56 percent of Mainers believe that now is a bad time to make a major purchase.

Last July, only 23 percent thought it was a bad time for a major purchase.

Nearly seven out of 10 respondents expect there to be bad times ahead financially for Maine businesses. That contrasts with the fewer than one in seven Mainers who held such a gloomy forecast in July of 2000.

Brian Robertson, director of research for Market Decisions, says the survey indicates that Mainers "are bracing themselves for difficult economic times."

Owners of a wide variety of small businesses say they've been seeing the public unease reflected in their bottom line.

Suzanne Gagnon and Michael Rancourt, the owner of The Jameson Art Group, a gallery in Portland, say the presidential election this year also is playing a role with the unease, because consumers become wary about possible shifts in economic policy.

"During a presidential election cycle, people do sit back a little bit economically," said Rancourt. "I've been through four presidential elections (since starting his business), and it always affects the market, usually on the negative side. Granted, it's never been this bad."

He said that in his 16 years in the business, this past year has been the worst since 2001, when there also was a blow to the economy after the terrorist attacks of Sept. 11.

Sales of household appliances are lagging too, according to Jason Agren, vice president of Agren Appliance & Television, which has stores in Augusta, Waldoboro, South Portland, Auburn, South Paris and Brunswick.

"We're very closely aligned with the housing market. We have noticed it slowing down," Agren said.

Candy sales are down somewhat at Harbor Candy Shop in Ogunquit, which has been making its own chocolates and other candies since 1956, said owner Jean Sotiropoulos-Foss. Still, she said, she is optimistic that the shop will continue to attract customers because candy is relatively affordable.

"Even when there is a downturn, people still want to buy something nice," she said.

David Clough, Maine state director of the National Federation of Independent Business, an advocacy association for small businesses that is based in Washington D.C., said such optimism characterizes Maine small businesses during this downturn.

"Their attitude is one of tighten the belt and tough it out," he said. "They intend to survive."