WASHINGTON -
Consumer confidence continues to dwindle, indicating that holiday spending will be lower than in past years, according to the annual holiday spending survey conducted by CUNA and the Consumer Federation of America.
The survey found that 35% of consumers plan to spend less this holiday season than last year, the highest percentage in eight years.
Rising Energy Costs Cited
The reason cited by most consumers was rising energy costs, including increasing costs for home heating and gas, according to Bill Hampel, chief economist for CUNA.
"By a wide margin, the strongest negative influence on holiday spending plans this year is high energy and gasoline costs," Hampel said. "At this time last year, gasoline prices were about $2.25 a gallon and had been falling since the summer. This year we have just the opposite: gas is over $3 and expected to rise."
While consumers generally spend more than they plan to, Hampel said this year's findings likely point to disappointing sales this holiday season. "This year's survey results are noticeably, but not dramatically, softer than last year. This suggests the bottom will not fall out of the holiday season...but it will be a tough year for retailers," Hampel said.
"While it's true that consumers actually end up spending more than they think they will, consumers are feeling the bite of rising energy costs, and other factors, with the likely result that spending growth will be weak this year," the CUNA economist asserted.
In the survey, conducted Nov. 8-11 among more than 1,000 consumers by Americans by Opinion Research Corporation, 38% of those saying they will spend less this year cited rising energy costs. That's up from 32% who cited higher energy costs for tightening their belts last year.
Another 32% cited rising costs for gifts as the main reason for belt-tightening; while 27% cited the financial condition of their families. The portion of consumers who plan to increase their holiday spending remained the same at 15%.
There was good news, fewer consumers than last year said they were concerned about paying off credit card balances from holiday-related spending. Only 24% indicated this concern this year compared to 33% last year.
Low and lower-middle income and minority Americans, however, were much more likely to voice concern about debt. Fifty-three-percent of those with incomes under $50,000 expressed concern about making monthly debt payments, and that concern was indicated by 55% of Hispanics and 49% of African-Americans.
Holiday Spending Concerns On The Rise
Thirty-four percent of those with incomes between $25,000 and $50,000 said they were concerned about paying off holiday-spending- related credit card balances. That compared to only 24% for the whole population.
"The good news is that a declining percentage of Americans express concern about paying off consumer and mortgage debt," said CFA Executive Director Stephen Brobeck. "The bad news is that these percentages are relatively high, especially for moderate-income and minority Americans."
Debt-related concerns for these groups are also seen in their responses to the question about what they would do with an unexpected windfall of $5,000. While 42% of all consumers said they would use this windfall to "pay down some debt," 55% of those with incomes between $35,000 and $50,000, 53% of African-Americans, and 50% of Hispanics said they would favor debt repayment over adding to savings or spending. (c) 2007 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com
