The economic squeeze in the US is now being felt by wealthy shoppers, whose tightening of purse strings is causing even more trouble for the lower-income workers who are dependent on their business and gratuities. Nathan Warren, a limo driver, knows this first hand: He has seen his monthly wages drop by 40 percent to about $1,800 since late last year. His work week at Newport Beach, California-based Classy Ride Limousine Service was reduced to three days from five amid slow business. "I have to struggle to get by. I am pinching pennies," said Warren, 30, a Costa Mesa resident. "I am eating more cereal and am not buying clothing." Cutbacks by the wealthy have a ripple effect across all consumer spending, said Michael P. Niemira, chief economist at the International Council of Shopping Centers. That's because American households in the top 20% by income - those making at least $150,000 a year - account for about 40% of overall consumer spending, which makes up two-thirds of economic activity. Niemira expects the retail sector, whose growth was fueled in part by strong gains at luxury chains, will struggle to eke out a 1% sales increase in stores opened at least a year during the next few months. That's below the 2.1% average for 2007 and 3.7% for 2006. Just look at the cutbacks by Dali Wiederhoft, a 52-year-old marketing executive from Reno, Nevada, made skittish by a volatile stock market, a 20% decline in her home value and recession fears. Over the past three months Wiederhoft pared her spending on clothes to $500 per month from about $3,000; that means no more Jimmy Choo shoes and David Yurman jewelry. Her cutbacks also included canceling the services of a cleaning woman and a lawn care company. She also plans to trade in her BMW for a Ford when her lease expires in about a month. "This is a time to have cash, not to spend. So, I'm cutting wherever I can," she said. Such reined-in spending seems to be the end of a winning streak for luxury retailers that once appeared immune to the economic slowdown. Tiffany & Co. and Williams-Sonoma Inc. both reduced their earnings outlooks, and Burberry PLC said it may miss its 2008 profit forecast. Coach Inc. reported a 1.1% decline in same-store sales at its North American stores for the quarter that ended December 29, and Compagnie FinanciÃ¨re Richemont SA, the Swiss parent of Cartier and Baume & Mercier, reported a slowdown in holiday sales growth. Soaring home values had made upper-middle class shoppers feel wealthy in recent years, causing them to trade up to $500 Coach handbags and $1,000 espresso makers, but a housing slump has wiped away their paper wealth. The woes are creeping into even the high-end luxury sector, as affluent shoppers are rattled by the turbulence in the financial markets. American Express Co., whose customers are generally affluent, said it expects slower spending and more missed payments on credit cards throughout 2008. The economy needs affluent shoppers to spend with enthusiasm. According to the government's latest survey of consumer expenditures, the top 20% of households spend about $94,000 annually, almost five times the bottom 20% and more per year than the bottom 60% combined. Then there's also the multiplier effect. When shoppers splurge on $1,000 dinners and $300 limousine rides, that means fatter tips for the waiter and the driver. Sales clerks at upscale stores, who typically earn sales commissions, also depend on spending sprees of mink coats and jewelry. But the trickling down is starting to dry up, threatening to hurt a broad base of low-paid workers like Warren, the limo driver. Classy Ride Limousine Service, which caters to clients with an average household income of $200,000, suffered a 10% dip in business last year, according to general manager Jason Lattier. "We've been really slow," he said, noting that 12 out of his 20 drivers were now working three days per week. With the average driver earnings $150 a day in tips and wages, that means a weekly shortfall of $300. In Chicago, Montopoli Custom Clothiers, a tailor to consumers willing to spend $3,000 to $30,000 for a custom-made suit, has also seen business suffer. Sales dropped 10% in October and November from the year-ago period, according to president Jeff Landis. Twenty percent of his clients, who include commodity traders and CEOs of Fortune 500 companies, delayed buying suits for fall, he said. "I consider them a leading economic indicator," Landis said. He's taken more aggressive measures, such as increasing calls to clients to get them in the store, but hasn't laid off anyone. "I'm not at the point of panic," he said. Overall, the super wealthy - consumers with a net worth of more than $10 million - are still splurging on $1m. boats, $10m. diamond jewelry and other luxuries, according to Milton Pedraza, chief executive of the Luxury Institute, a research institute based in New York. But this crowd could stop splurging, simply because they're not in the mood. That happened right after the September 11, 2001, terrorist attacks, though luxury spending rebounded soon after. Jim Taylor, vice chairman of marketing consultancy The Harrison Group, said he's seeing a marked shift in the way people look upon spending. "There's a real decline in enthusiasm for self-indulgent purchasing," he said. Orrin Feingold, a New York entrepreneur, decided to get out of his lease on a Volvo XC90 sport utility vehicle because he realized he didn't need to spend $650 a month and another $500 on parking. Feingold, 39, a former chief financial officer of a health care company, said the uncertain financial climate was making him think twice about spending. "I want to be more practical," he said. Luxury stores, which have a big presence in New York, are closely monitoring Wall Street. The financial industry accounts for about 20% of wages in New York City, according to the State Comptroller's Office. Alan Johnson, managing director of Johnson Associates, a leading executive compensation consultancy, expects bonuses to fall as much as 30% this year. But more importantly, massive layoffs on Wall Street could cause the affluent to pull back even more.