Rising consumer confidence is expected to result in higher spending this holiday season, CUNA said last week in announcing the results of its fifth annual holiday spending survey.
"Over the five years we've been doing these surveys, our results reveal that holiday spending is an area where consumers start out with the best of intentions, but end up exceeding their budgets," said Bill Hampel, chief economist for CUNA, which conducted the survey with the Consumer Federation of America. "Consumers on balance have told us they intend to reduce spending compared to the previous year, but actual holiday spending subsequently rose. This year consumers are feeling a bit less restrained than last year, so spending should rise modestly."
Hampel said their figures project an increase in holiday spending of 4% to 5% this year, an average of $800 per household, on items such as gifts and food. "People are feeling better about their financial futures than they did last year," he said, citing positive reports on jobs and other forecasts of consumer confidence.
The survey found that 17% of consumers plan to spend more than they did last year, up from 15% who planned to spend more last year; while 32% planned to spend less, down from 34% who planed to spend less last year. Half of respondents in 2004 and 2003 said they planned to spend about the same.
Among those who said they will increase their spending, 43% said it is because their economic situation has improved or they feel more confident about their future economic prospects. More than a third, 36%, said it is because they have more people to buy for this year.
Consumers who plan to spend less this year said their top reason was a decline in their economic condition or they need to deal with other expenses not related to the holidays. Twenty-five-percent of respondents cited either of those reasons. A desire to pay down existing debt was cited by 17% of those saying they plan to spend less this holiday season.
"Over the five years we've done the survey consumers told us they plan to spend less, but they invariably spend more," said Hampel.
Stephen Brobeck, executive director of the CFA, suggested several spending tips for the holidays. They included taking care with the increasingly popular prepaid gift cards, some of which have interest provisions and/or fees charged for balances. He also warned against prospects of being 'phished' after online shopping, giving crooks the opportunity to fraudulently solicit shoppers to steal their credit card and other confidential financial information.
Brobeck also suggested several other steps aimed at controlling spending, including: adhering to a budget; making a list; comparison shopping; paying off debts as soon as possible, and planning for next year by opening a Christmas Club.
