Fourth of six parts.

BY TESS NACELEWICZ

Blethen Maine Newspapers

It took 11-hour work days and devotion to customer service, but Phu Le and his wife Ann Nguyen have made the Portland nail salon they opened seven years ago prosper.

But now, despite the loyal customer base the two refugees from Vietnam have painstakingly built up over the years, business has been declining at Elizabeth Complete Professional Nail Care & Spa. Earnings at the salon on Cumberland Avenue dropped 25 percent in the past six months compared to previous years, Le estimates.

"This year we really slowed down," he said.

With the rising cost of heating fuel, gasoline and food, some of the salon's clients can no longer afford to get the manicures and pedicures they enjoy, Le said. Given a choice between turning on the heat and getting their nails done, he said, "this becomes a luxury."

Mainers' consumption declines

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 nonprofit, 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.

Art sales are down, according to Suzanne Gagnon, owner of the Cooper Jackson Gallery on India Street in Portland and president of The Gallery Association of Portland Maine, which represents 16 art galleries.

'The perfect storm'

"As someone said to me, it's been kind of like the perfect storm this winter: the economy, the weather and the election," Gagnon said. "All three things affect art sales." Her gallery is new -- it opened last June -- but she estimates sales have been about half of what she anticipated.

The economic downturn means people have less disposable income for purchasing art. Also, Gagnon said, the art market is closely tied to the housing market -- and as fewer new houses are built, there are fewer people looking for artwork to decorate their new homes. She and Michael Rancourt, the owner of The Jameson Art Group, a gallery on Commercial Street in Portland, say the presidential election this year also is playing a role, 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.

Jewelry sales also are being impacted by the economy, according to Dan Dostie of J. Dostie Jewelers.

"Jewelry sales across the board have been affected because much of the public is looking to take care of the essentials," he said.

He estimates sales are down about 7 percent, but said that could be worse if the company didn't have an established client base. "A lot of jewelers got hit a lot harder," he said.

Home sales important

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

"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.

Still optimistic

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."

At the Elizabeth nail salon, Le is offering incentives to draw customers, such as foot massages with heated stones that come free with every pedicure.

And he said he intends to follow through with a plan to open a second salon on Broadway in South Portland on May 1. Le believes he can help revive the economy by forging ahead with his business and providing jobs for more employees.

"People have to keep their head up, and go do it and be positive," he said.