Economy

One in Four Americans Worry About Monthly Payments

by Dennis Jacobe, Chief Economist

Half of Americans plan to decrease their debt; nearly as many say it is a bad time to borrow

PRINCETON, NJ -- The percentage of Americans saying they are worried about keeping up with their monthly payments over the next six months reached 23% this month -- up from 19% a year ago and 15% in March 2007.

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Americans Reducing Their Debt

Even as Gallup's Consumer Mood Index shows Americans to be less pessimistic about the U.S. economy than they have been at any time since the financial crisis took hold in mid-September 2008, a new Gallup Personal Credit Index poll shows that 23% of consumers are either very (6%) or somewhat (17%) worried that they will not be able to continue making their monthly payments over the next six months.

The increase since last March in consumer worry about meeting monthly expenses (from 19% to 23%) contrasts with a slight improvement in Gallup's Consumer Mood Index over the same period (from -91 to -83). This would seem to signify that that the year-long economic struggle has taken a toll on consumers' sense of financial security that won't be immediately rectified by an upturn in confidence about the economy.

Further reflecting consumers' continuing financial fears, 34% of Americans say they have reduced their total amount of debt over the past six months. Even more importantly for the future course of the economy, 50% say they intend to reduce their total debt over the next six months.

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Many Americans Say Now a Bad Time to Borrow

Forty-six percent of Americans say now is a bad time to borrow, up slightly from 42% a year ago and almost twice as high as the 27% of March 2005. At the same time, the percentage of consumers saying it is a good time to borrow has fallen from 26% in March 2005 to 19% in March 2009.

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Commentary

Better-than-expected economic results for February -- including retail sales, durable goods, and home sales -- have combined with both a more positive view of the economic outlook and numerous unprecedented actions on the part of the Obama administration and the Federal Reserve to produce a sharp improvement in the equity markets and in consumer/investor confidence. Still, Gallup's other economic measures, including its jobs measures and its consumer spending measure, show no improvement. As a result, the key question right now is whether a continued surge in optimism at the national level can get consumers spending once again, or whether continued job losses and worry about paying monthly bills are having a more personal impact and will keep consumer spending in check.

Results of Gallup's Personal Credit Index poll suggest that consumers remain fearful about meeting their monthly obligations. Further, consumers' reduced use of credit appears to be due not only to the current credit crunch -- the lack of lending and loan availability -- but also to consumers' view that now is not a good time to borrow but is the time to reduce debt. In turn, it may be that February's economic uptick will be more of a chimera in the immediate term than a harbinger of future economic reality.

Survey Methods

Gallup Poll Daily interviewing includes no fewer than 1,000 U.S. adults nationwide each day during 2008 and 2009. Gallup Personal Credit Index results are based on questions asked of 1,000 or more adults, aged 18 and older, conducted March 27, 2008, and March 23, 2009. For results based on these samples, the maximum margin of sampling error is ±3 percentage point.

For results prior to 2008, telephone interviews were conducted with 1,000 or more adults, aged 18 and older. For the total sample in each of these surveys, one can say with 95% confidence that the maximum margin of sampling error is ±3 percentage points.

Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).

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.

Polls conducted entirely in one day, such as this one, are subject to additional error or bias not found in polls conducted over several days.

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