WASHINGTON—Hopes run high this holiday season that consumer confidence and spending will continue to rise following the worst recession in many decades. Though no one has a crystal ball to predict the amount of spending this holiday season, according to a national survey of adult consumers, it is likely to be somewhat higher than last year.
Bill Hampel, chief economist for the Credit Union National Association (CUNA), said to expect holiday spending to increase in a range between 3.5 percent and 4 percent. He bases his prediction on a national survey that asked respondents their intentions for holiday spending.
Commissioned by the Consumer Federation of America (CFA) and the Credit Union National Association (CUNA), the 14th annual holiday spending survey was conducted by ORC International. A representative sample of 1,002 persons was interviewed by landline or cell phone during Nov. 7-10.
The results were released at a press conference on the day before Thanksgiving, Nov. 27—just before the serious shopping gets started. The season traditionally begins the day after Thanksgiving, Black Friday, but beginning last year, it seems to be changing to Thanksgiving Day as merchants try to lure shoppers in earlier.
The key question in the CFA/CUNA survey begins, “Thinking about your holiday plans this year, do you intend to spend…”
The most frequent answer is that spending will be about the same as the previous year. The answer has been given by roughly half of respondents since 2000. The exception was 2008, during the depth of the recession, when only 34 percent answered they would spend the same, and 55 percent of respondents said they intended to spend less.
“The good news is that there was an increase in those who said they will spend more, and a decrease in those who say they will spend less, said Stephen Brobeck, executive director, Consumer Federation of America.
The numbers tell the story.
This year, 13 percent answered, “much more than last year” or “somewhat more than last year.” For 2012, the number was 12 percent, and for 2011, the percentage was 8. This increasing trend is very significant, according to Hampel and Brobeck.
The trend is mirrored with those who answered, “somewhat less than last year” or “much less than last year.” These responses have decreased over recent years to 41, 38, 32 percent for years 2011, 2012, and 2013, respectively.
The percent change is what is important here, not the actual percent values, because consumers almost always spend more than they say they plan to spend.
“Invariably more respondents tell us they will reduce spending rather than increase spending, often by a wide margin. It’s natural to plan not to overindulge. But that doesn’t mean spending will likely decrease,” Hampel said.
The meaning of the CFA/CUNA surveys derives from the year-to-year comparisons. So, for recent years, more people say each year that they will spend more than the previous year, and fewer people are saying they will spend less. That’s a good indication that it will be a better year for retailers for the coming holiday season.
Income Effect
Intentions to spend are influenced by income levels and worries about debt. Brobeck said that “lower income Americans were more likely to say that they would be reducing holiday spending.” The survey found that nearly 40 percent of families earning less than $50,000 per year said they would spend less than last year. This number compares with the overall percent of 32, cited above.
The survey indicates greater concerns about paying down debt for the lower income families, less than $50,000. Respondents were asked how they would use an unexpected windfall of $5,000. Over half of lower income respondents (51 percent) said they use most to pay down debt, compared to one-third (32 percent) of respondents with incomes over $100,000 who would use extra money to reduce debt.
