Consumers Plan to Spend More this Holiday Season
In both years, the survey questions were developed by CFA and CUNA and were administered to a representative sample of adult Americans by ORC International in early November (9-13 this year). This year, 660 persons were interviewed by landline and 352 by cell phone.
“Our survey results suggest that holiday spending this year will likely rise by between 3.5% and 4% compared to last year,” said Bill Hampel, Chief Economist for the Credit Union National Association. “This represents the fourth year of gradual improvement in holiday spending plans since a sharp decline in such plans in 2008.”
The intention of consumers to increase holiday spending from last year is consistent with, and may well reflect, perceived improvement in their financial situation. From 2011 to 2012, the percentage who said their financial situation was better than a year ago rose from 19 to 24, and the percentage who said it was worse fell from 37 to 33. Again, the change is statistically significant.
Despite the rise of student debt and continued concern about mortgage debt, the percentage of those who said they were concerned about meeting monthly debt payments fell from 45 to 43 percent. And those who said they were unconcerned rose marginally from 38 to 39 percent. One factor here might be the increasing percentage -- 19 to 24 percent in the past year -- who said they did not have any credit card payments.
Yet, things are still financially tight for many families. When asked if they had extra funds (not including lines of credit) available to pay for an unexpected expense of $1,000, only 49 percent said that they did. This lack of emergency savings may help explain why an increasing percentage -- 38 to 43 over the past year -- said that, if they received an unexpected windfall of $5,000, they would use most of it to add to savings or investments.
Gap Between Affluent and Poor Widens
There have been many studies and press reports on huge income and wealth gaps between high- and low-income families. But there has been little focus on whether these gaps have increased over the past year. The 2011 and 2012 surveys suggest that they have.
Whether respondents reported they would increase or decrease holiday spending from last year was related to income. Among those with incomes under $25,000, 11 percent said they would spend more while 44 percent said they would spend less. Among those with incomes over $100,000, 18 percent said they would spend more while 31 percent would spend less.
These income-related differences in spending plans may well reflect perceptions about one's financial situation. Among the low-income group, only 21 percent said this situation was better than last year while 45 percent said it was worse. Among the upper-income group, 30 percent said their financial situation was better while only 23 percent said it was worse.
The linkage between holiday spending plans and perceived financial situation was made even clearer by correlating the two variables. Among those who said their situation had improved, 31 percent were planning to spend more than last year while only 19 percent were planning to spend less. But among those who said their situation had worsened, only 2 percent were planning to spend more than last year while 66 percent were planning to spend less.
"It is unfortunate that families with the lowest incomes are more likely than high-income families to think their financial situation has deteriorated over the past year, so are more likely to cut back holiday spending," said CFA Executive Director Stephen Brobeck.
Even though fewer lower-income than upper-income families carry consumer and mortgage debt, a far higher percentage of the former than the latter expressed concern about this debt -- 51 vs. 28 percent. In part, this may reflect the fact that only 19 percent of the lower-income, but 82 percent of the upper-income, respondents said they had extra funds to cover a $1,000 unexpected expense.