Variety of Gallup indicators suggest consumers will spend cautiously
PRINCETON, NJ -- The suspense over whether U.S. consumers will shop 'til they drop or stay home on Black Friday could be a matter of survival for a great many retailers this year. From Americans' pessimistic views about their standard of living, to their frugal estimates of what they will spend on Christmas gifts this year, to their lack of confidence in the overall economy, consumers are sending a strong message that holiday sales will be light.
1. Consumers' Christmas Shopping Estimate
Gallup's most direct advance indicator of holiday retail sales comes from a question asking Americans to estimate the total amount they will spend on Christmas gifts each year.
Gallup's latest Christmas spending figure, from mid-November, found Americans, on average, planning to spend $616. Ominously, this is down 29% from the $866 recorded at a comparable point in November 2007. It is also the lowest holiday spending estimate Gallup has found in any year since it began tracking these trends on an annual basis in 1999.
2. Plans to Increase or Decrease Christmas Budget
A related Gallup question asks consumers whether they plan to spend more, about the same, or less on Christmas gifts than they did the year before. Again, Americans' current answers point to weak holiday sales.
Only 7% of Americans surveyed Nov. 13-16 say they will spend more this year than they did in 2007, while 46% predict they will spend less. Historically, the percentage spending less and the percentage spending more have been more evenly balanced, with only a modest tilt toward less spending.
Furthermore, there is no sign that consumer caution is easing. In fact, in just the past month, the percentage saying they will spend less on gifts this year grew from 35% to 46%, shattering Gallup records maintained since 1990.
3. Financial Comfort
A somewhat less direct measure of consumer willingness to part with cash or rack up credit-card bills this season comes from a question asking Americans about their standard of living. On balance, more Americans today say they feel their standard of living is getting worse, rather than getting better, 45% vs. 36%.
Not only are Americans feeling glum about their standard of living, but their current mood sharply contrasts with how they felt at the start of January, when 56% said their standard of living was improving and only 26% said it was declining.
The percentage of Americans worrying about money is also higher today than it was in January, although not dramatically so. A total of 40% currently say they worried about money "yesterday." This includes 14% saying they were very worried and 26% somewhat worried. At the start of the year, 31% were worried, including 7% very worried and 24% somewhat worried.
4. Economic Confidence
Beyond Americans' evaluations of their personal financial wellbeing, they are highly aware of the troubling economic news in the world around them, and that could have a real impact on their willingness to take financial risks.
Gallup tracks consumer confidence in the U.S. economy on a daily basis, reporting the results in ongoing three-day rolling averages. According to the latest results, from Nov. 23-25, nearly three-quarters of Americans (73%) have negative overall views of the national economy, while only 4% have positive views and 19% have mixed views. These summary evaluations come from the independent findings that 60% of Americans consider current economic conditions to be "poor," and that 76% perceive them to be getting worse.
The 2008 Gallup trend in public perceptions about current economic conditions clearly displays the dramatic change in economic mood that has taken place.
Additionally, the late October/November readings on this measure since 1992 punctuate just how negative consumer attitudes are today compared with past holiday retail seasons. Public confidence about the economy is more negative today than at any other time since the trend was established in 1992.
Consumer confidence has undergone a dramatic decline over the past year, sinking this fall to a recent historical low. Americans' awareness of the sharp downturn is reflected in their own economic and financial mood. The question is whether consumers will heed that heightened sense of financial fear and stay home on the day they traditionally help retailers turn a profit, or toss their fear to the wind as they point their car toward the nearest mall.
After several months of lackluster retail sales, it's possible that the promise of heavily discounted prices -- and descending gas prices -- could unleash some of the pent-up demand for clothing, electronics, toys, and other traditional holiday purchases that may have been building up. At least that's what many retailers are hoping.