As oil prices rise and the economy struggles, increasing numbers of Americans are cutting spending on luxuries or higher value goods to cope with their worsening personal financial situation, it has been reported.

A survey by Unity Marketing found that spending on luxury goods fell by 20 per cent among those with an average income in the second half of 2007, according to the Associated Press.

The trend is reflected in the larger corporations as well, with coffee giant Starbucks closing 100 of its least profitable stores and sales of larger cars, trucks and SUVs on the decline as Americans' disposable income falls.

Juliet Schor, a sociologist at Boston College, explained that those with average incomes now have to think carefully before spending.

"People postpone purchases. People take on less debt and pay off more debt. They just get more conservative," she said.

The situation may be even tougher for those on lower incomes, as debt elimination is more difficult for those who find it hard to cut down on essentials.

Recent research showed that 29 per cent of those in low or middle income groups found that medical expenses contribute significantly to their overall credit card debt, according to creditcards.com.

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