Christmas Spending Projection Still Looks Positive

by Lydia Saad

Average predicted spending is up $40 over 2006

PRINCETON, NJ -- At a time when a number of economic indicators appear to be having a sobering effect on consumer confidence, Gallup's latest measure of Americans' 2007 Christmas spending intentions offers encouraging news for the nation's retailers.

According to the new Gallup Poll, conducted Nov. 11-14, Americans predict they will spend an average of $866 on Christmas gifts this season. This is slightly higher than the $826 Americans expected they would spend on gifts for the 2006 holiday at the same time last year, and is higher than previous November estimates this decade.

Historically, Gallup has found a fairly reliable relationship between changes in this key indicator and actual holiday spending. Thus, assuming Americans' spending intentions do not drop substantially over the next five weeks, the poll data suggest this year's holiday retail season will be at least as good as last year's, and possibly better.

Additionally, it appears that the robust spending intentions of middle- and upper-income Americans will sustain holiday retail sales this year; lower-income households may be cutting back.

Gallup History Lessons

Gallup has recorded Americans' Christmas spending intentions every November since 1999. In years when Americans' anticipated gift outlays fell well below the previous year's estimate (2000, 2001, and 2002), year-to-year growth in holiday season retail sales was relatively anemic, generally falling below 5%. (According to the Census Bureau's "GAFO" measure of department store-type retail sales for the months of November and December each year, 5% annual growth in holiday spending is about the norm.)

  • In 2000, Gallup measured a $40 drop in anticipated spending compared with 1999. This was met with a 3.9% increase in November/December GAFO retail sales over 1999.
  • The smaller decline of $23 seen in 2001 was met with a 4.4% increase in retail sales.
  • The $104 drop in anticipated spending between 2001 and 2002 was associated with a paltry 1.8% increase in 2002 retail sales -- one of the worst holiday retail seasons in recent years.

By contrast, in years when Americans' anticipated Christmas gift-spending figure equaled or exceeded that of the previous year -- as it does today -- retail sales have shown fairly robust annual increases, in the 5% to 6% range.

Spending Diversity

Although Americans' predictions of how much they will spend on Christmas gifts this year average $866 per person, the median is $500 -- meaning that the midpoint of all individual spending estimates falls at $500. Half of Americans will spend $500 or more, and half will spend $500 or less.

The average spending figure is driven up by the third or so of Americans who say they will spend $1,000 or more on gifts this year, as well as by the 24% who will spend between $500 and $999. One-third expect to spend under $500.

Just 11% of Americans offer no spending estimate, including 6% saying they will spend nothing or don't celebrate Christmas.

Christmas spending intentions vary substantially by income. A majority (54%) of those in households earning at least $75,000 per year plan to spend $1,000 or more, compared with only a third (36%) of those in middle-income households and 8% of those in lower-income households.

Accordingly, the average estimated spending on gifts among upper-income Americans is more than three times that of lower-income Americans: $1,323 vs. $378.

Lower-Income Spending Looks Dampened

Discount retailers have reportedly been bracing for a difficult retail season, doing what they can to coax shoppers into their stores with early sales and promotions. The new poll finds some justification for that concern.

The mean Christmas spending estimate of Americans earning less than $30,000 per year is currently only $378. That is down from an estimated $601 among this group in October, and is also below the $512 found in November 2006.

By contrast, the current spending intentions of middle- and upper-income Americans exceed or are similar to what they were in October, and exceed the figures recorded last November.

Americans Perceive That They Are Being Frugal

In addition to the dollar estimate, Gallup asks respondents to gauge whether they will spend more, less, or about the same on Christmas gifts this year as last year. Most times this has been asked, the majority of shoppers have perceived that their spending would be about the same; among the rest, a higher proportion have tended to say they would be spending less rather than more.

That is the case today, as it was last month. However, the latest survey finds a slight increase since October in the percentage of Americans saying they will spend less than last year on gifts (from 19% to 25%).

Longer term, the current results are similar to November of previous years, some of them years with robust holiday sales, and others with much weaker sales.

Bottom Line

It remains to be seen whether Americans' estimates of their 2007 Christmas spending hold up through the season. But both of Gallup's fall 2007 readings so far suggest consumers are at least on course to maintain last year's level of spending.

Survey Methods

Results are based on telephone interviews with 1,014 national adults, aged 18 and older, conducted Nov. 11-14, 2007. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

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