Consumers Say: Less Likely To Spend More This Holiday.

Far more consumers say they will cut back holiday spending this year, rather than increase spending, and a key reason is the cost of gasoline and home heating, according to the results of the sixth annual holiday spending survey commissioned by the Consumer Federation of America (CFA) and the Credit Union National Association (CUNA).

Three in ten (30 percent) consumers responding to the survey said they would spend less on holiday spending this season than they did in 2004, while only 14 percent indicated they would spend more. About half (51 percent) said they would spend about the same. The CFA/CUNA survey was conducted Nov. 10-13 among more than 1,000 representative adult Americans by Opinion Research Corp. International. The survey’s margin of error is plus or minus 3 percentage points.)

Energy costs a key factor in intended spending The CFA-CUNA survey asked respondents about the influence of seven factors on intended holiday spending. Far and away the most important of these factors was the cost of gasoline and home heating, which more than four in ten (41 percent) said would somewhat or greatly decrease holiday spending. Next most influential in decreasing spending were “your general household expenses” at 31 percent, but this factor includes consumer energy costs.

At the same time, the percentage of those who expressed concern about paying off credit card balances from holiday spending rose from 22 percent in 2004 to 25 percent in 2005, and those who are unconcerned dropped from 55 percent in 2004 to 45 percent this year. “Rising energy prices could well either curb consumer holiday spending or boost related credit card debt,” said CFA Executive Director Stephen Brobeck.

Among the other factors influencing consumers’ attitudes in increasing or decreasing holiday spending are:

• Price of gifts: 30 percent said this factor would influence them to somewhat or greatly decrease their spending; 19 percent said it would increase their spending.

• Current economic situation: 29 percent of the consumers said they would cut back on spending somewhat or greatly because of this influence; 18 percent said it would increase their spending.

• Confidence in future economic prospects: 21 percent cited this influence as causing them to increase spending somewhat or greatly; an equal number said it would cause them to decrease spending.

“These responses, when compared to answers to previous versions of the survey, suggest to us that consumers will increase spending almost as much this holiday season as they did last year,” said CUNA Chief Economist Bill Hampel. “However, gasoline and home heating costs are clearly weighing heavily on the minds of a significant number of consumers as they enter the holiday shopping season.”

Concern about paying off credit cards on the upswing

A quarter of consumers in this year’s survey said they were somewhat or very concerned about paying off their credit card balances from this year’s holiday spending – up slightly from last year’s 22 percent who said the same. Conversely, those saying they were somewhat or very unconcerned about paying off their credit cards from this holiday season were 45 percent – down considerably from last year’s 55 percent saying the same thing. Those saying they were “very unconcerned” showed the biggest change, dropping to 33 percent in 2005 from 41 percent in last year’s assessment.

Further, in the six years that CUNA and CFA have conducted the survey, this year’s total of those “unconcerned” about paying off their credit card holiday bills is the lowest aggregated total. The highest was in 2002, when 66 percent said they had little concern about their credit card bills piling up.

On the other hand, consumers seem to be less concerned about meeting their monthly debt overall. In fact, the number of those calling themselves somewhat or very concerned about making their monthly payments was down slightly, at 35 percent, from last year (38 percent).

However, nearly half (49 percent) of those in the “middle-middle” income bracket of $35,000 to $50,000 said they were very or somewhat concerned about meeting their monthly debits. Those on the fence about their monthly payments (neither concerned or unconcerned) was up to 14 percent from last year’s 8 percent. Those this year somewhat or very unconcerned, however, fell slightly to 45 percent from 49 percent in 2004.

The declining concern about debt overall may be a clue as to what consumers would do with a windfall of $5,000. Those saying they would “pay down some debt” declined to 39 percent this year, from 43 percent in 2004. However, more than two out every five consumers (about 40 percent) in each of the income brackets below $75,000 said they would pay down debt with the windfall.

But consumers are not necessarily eager to spend most of that windfall either—42 percent, according to the survey results, said they would add to their savings most of a $5,000 windfall. In the six years of the survey, that matches the highest number of consumers saying they would add the extra dollars to their savings. About 51 percent of those with incomes of $75,000 or more said they would save the money.

Only 14 percent said they would spend the windfall (up from 11 percent last year). “While the economy is showing strength, it is also apparent from these numbers that those in the very middle of the economic spectrum are feeling something of a squeeze, which bears watching over the holiday period and into the new year,” said CUNA’s Hampel.