CUNA/CFA Say Holiday Spending Still Likely to Rise, Despite What Consumers Say; Energy Prices Could Still Dampen Demand

WASHINGON – More consumers say they plan to cut their holiday spending in 2005 than spend more, according to a survey conducted jointly by CUNA and the Consumer Federation of America. But while this would seem to be bad news for retailers looking for sales and card issuing credit unions looking for interchange, CUNA Chief Economist Bill Hampel and CFA Executive Director Steven Brobeck downplayed the results and still forecast an increase in holiday spending of 5% over last year. “There is often a disconnect between how people say they will behave and how they actually behave,” explained Hampel at a Nov. 21 press conference called to reveal the results, “and there is a lot of institutional momentum in holiday spending.” Thirty percent of consumers surveyed said they would spend less than they did last year on the holidays, compared to 32% who said that last year and 34% who said it in 2003. The two organizations have been cooperating in surveying consumers on the eve of the November-December shopping season for six years. This year they asked 1,000 consumers about their holiday spending plans relative to last year. Some of Hampel’s and Brobeck’s optimism may come from the fact that the 2005 survey is just the latest in a series of questionnaires which have seen a greater percentage of surveyed consumers say they will cut back on their holiday spending only to not follow through. While 32% of consumers surveyed in 2004 said that they would cut back on spending and only 17% said that they would spend more, in the end consumer holiday spending still rose 5.1%. In 2003, only 15% of consumers surveyed said they planned to spend more in the holidays and 34% said they would spend less, but the final count on consumer holiday spending came in 5.4% higher than the year before. Both experts emphasized, however, that there is still room for things to drive consumers away from the stores, in particular gasoline prices and the price of heating homes. The two organizations conducted their survey Nov. 10 – Nov. 13, a time period when gas prices began to trend away from their previous highs but were still higher than they were when the results were announced on the day of the press release. Falling gas prices should continue to make consumers more open to spending, but rising gas prices could influence consumers to spend less, they said. But an even bigger drag on spending might come in the form of significantly higher home heating bills that might hit in the middle of the eight-week shopping season, both Hampel and Brobeck said. Brobeck made the point that the high prices of both heating oil and natural gas have not dropped significantly and if higher than expected energy bills hit in the first half of December, consumers could still cut back on their holiday spending. In addition, the percentages of consumers surveyed who said they were either very concerned or somewhat concerned about their credit card balances haven’t changed that much. In this year’s survey, 25% percent of consumers surveyed said that they were either very concerned or somewhat concerned about their credit card debt, up from 22% last year but down from 27% in 2003. Further, the percentage of consumers who said they would pay down some credit card debt with a $5,000 windfall continued its slide, hitting 39% in this survey which is down from 43% in 2004 and 46% in 2003. The survey found that the middle income households with incomes of between $30,000 and $50,000 were the most concerned about their credit card debts and ability to meet monthly bills. [email protected]