By: Daryl Tolliver
Despite fears over the possibility of a "fiscal cliff," industry professionals say that Americans are unlikely to pare back spending this holiday season. In fact, the opposite appears to be true. A new analysis shows that consumer holiday spending is likely to trend upwards, demonstrating consumers' confidence in the economy and their own personal finances.
The data comes from the 2012 Consumer Federation of America (CFA)/Credit Union National Association (CUNA) holiday spending survey, which found that consumers plan to spend more money on holiday shopping than they did the previous year. According to the survey results, the percentage of those who said they will spend more this year than they did in 2011 increased from 8 to 12 percent. Those who said they would spend less fell to 38 percent, down from 41 percent. Overall, holiday spending is expected to rise between 3.5 and 4 percent over last year's figures, the survey suggests.
"[This] represents the fourth year of gradual improvement in holiday spending plans since a sharp decline in such plans in 2008," said CUNA chief economist Bill Hampel.
Spending largely correlates with consumers' financial conditions
The study also revealed that consumers' spending plans were largely in line with their perceptions of their own financial conditions, with those who feel that their personal finances have improved citing higher rates of spending. For example, 31 percent of those who will spend more also noted that their financial situation has improved from 2011. Further, the survey revealed that it was perceptions of financial strength, rather than income, that largely drove consumers' plans. For example, 11 percent of respondents with incomes under $25,000 said they would spend more this year, while 44 percent said they planned to spend less. In addition, 18 percent of those with incomes of more than $100,000 said they planned to spend more this year, while 31 percent at that income level said they would reduce their holiday spending.
During the holiday season, spending can balloon out of control and lead consumers toward a dangerous debt path. As more Americans are likely to utilize reward programs and discount benefits to lower their total costs, the holiday season may represent a good period for community banks and credit unions to highlight the merits of debit card reward programs and cash-back incentives.