Consumers in Ohio and elsewhere spent more money last year on entertainment, dining out and other life-affirming indulgences for the first time since the recession began in late 2007.

Annual household expenditures on everything from restaurant meals to beauty salon visits rose 3.3 percent to $49,705, according to the most recent Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics. That was the first yearly increase in spending since a 1.7 percent bump from 2007 to 2008.

And the latest government data indicates consumers are still feeling more upbeat about their finances, which contributed to better-than-expected economic growth in the most recent quarter.

Consumer spending helped the U.S. economy expand at a 2 percent annual rate from July through September — slightly faster than the consensus forecasts of many economists — and consumer sentiment in October surged to its highest point since September 2007, according to separate reports from the U.S. Commerce Department and The Conference Board.

The uptick in discretionary spending and consumer confidence bodes well for an economy that depends on consumers for about 70 percent of overall growth, said Dennis Sullivan, an economics professor at Miami University.

“Consumer spending is the single largest component of aggregate spending,” Sullivan said. “If you ask, ‘Where are we going to get growth from?’ That would be it.”

After several years of paying down debt and cutting expenses to offset job losses and unprecedented declines in home values, consumers’ attitudes toward spending are finally beginning to thaw, Sullivan said.

“There was both a substantive and psychological drag on consumption that has been going on now for about four years,” he said. “But people are starting to say to themselves my debt situation is under control and maybe it’s alright to go out now and put some things on the credit card.”

The splurge has returned

The turnaround has boosted sales and traffic for a variety of local shopkeepers whose customers often kept a low profile at the height of the recession.

“I’ve been doing hair for about 10 years, and all of my regulars are beginning to come back after trailing off over the last couple of years,” said Amber Bromer, who opened Salon Noir in Centerville about two years ago. “They’d come in once every six months instead of once every six or eight weeks. That’s starting to pick back up, and we’re seeing a lot of new customers. It could be my busiest year.”

Henry Dean, vice president of operations at Boston Stoker — the coffee chain his family founded in Dayton in 1973 — sipped his own product earlier this week in a toast to “the return of the $5 latte.”

“When the recession first hit, people kind of panicked and really tightened up their spending on coffee,” Dean said. “They may have still been coming in, just cutting back on their spending. People are starting to go back to their old habits now as far as spending five bucks on a latte rather than buying a black cup of coffee for $1.75. Overall, we’re starting to see some positive changes.”

Perhaps nowhere is the trend more evident than in the restaurant industry because eating out is typically the first expense people cut back on in an economic downturn, explained Jarrod Clabaugh, communications director for the Ohio Restaurant Association in Columbus.

“During the economic downturn people were trying to push their dollars as far as they could, and we saw a lot of growth in the fast-casual and fast-food segments, where people knew they could get a larger meal for their family for the money,” Clabaugh said. “Now, we’re seeing people going back to more traditional dining and ordering more appetizers and specialty drinks and possibly having dessert. Consumers seem a little bit more confident that the economy is turning around.”

Consumer spending has help boost economic growth, but it’s still too slow to drive down unemployment rapidly or put pressure on employers to boost wages, said Greg Lawson, a policy analyst at The Buckeye Institute for Public Policy Solutions in Columbus.

In addition, Lawson said, there are still a handful of “nightmare scenarios” on the horizon that have the potential to stifle growth, including the fast-approaching “fiscal cliff” that would result in government spending cuts and tax increases at the end of the year unless Congress acts.

“We think that is going to get taken care of, and there’s going to be a deal in Congress,” Lawson said. “But if you want to talk about something that could immediately knock all of our positive momentum off stride, that’s it.

“I think there is reason for cautious optimism, but the operative word is cautious,” he said. “It’s good the people are feeling a little bit better and spending a little bit more…but there’s a lot of uncertainty that’s still out there about the long-term economic prospects here in the U.S. This is not an expansion that anybody can feel comfortable about.”