It might be the traditional opening of the holiday shopping season, but consumers flocked more to their computers than to the malls last Friday, according to statistics compiled by the Associated Press. But consumers, overall, intend to spend more during the holiday season than they did a year ago, according to a study from the Credit Union National Association and the Consumer Federation of America. But, as always, while retailers are pinning their hopes on high sales, economists and others have concerns about consumers getting into too much debt.
The season presents challenges to consumers and banks alike. For consumers, sticking to a budget during the November and December gift-buying rush can be difficult.
“Over the five years we’ve now been doing these surveys, our results reveal that holiday spending is an area where consumers start out with the best of intentions but end up exceeding their budgets,” said Credit Union National Association Chief Economist Bill Hampel. “Consumers on balance have told us they intend to reduce spending compared to the previous year, but actual holiday spending subsequently rose. This year consumers are feeling a big less restrained than last year, so spending should rise modestly.”
It is a concern for banks and credit unions when customers get over their heads in debt. Debt itself is becoming more common, said Todd Martin, an economic advisor to People’s Bank in Bridgeport.
“We’re seeing that [consumer debt] growing,” he said.
Debt relative to income is at nearly the highest level ever, Martin said. And with the Federal Reserve likely to continue pushing up short-term bank interest rates, that ultimately could spell trouble for consumers in already in debt as other rates – such as those associated with credit cards – also may rise.
Consumers who contributed to the Credit Union National Association’s survey said they have fewer concerns this year about paying off debt and are more optimistic about their economic prospects. Nearly half of the 1,000 respondents said their economic situation has improved or they feel more confident about future economic prospects. About one in three said they have more people to buy for, so many are also compiling longer gift lists, according to the survey.
Credit unions advise their customers to be good savers and not to go unwisely into debt, said Art Corey, president and chief executive officer of the Connecticut Credit Union Association in Wallingford.
Responsible holiday spending, however, is good for everyone, Corey said.
“Certainly holiday spending is good for the economy overall,” he said.
The Credit Union National Association and the Consumer Federation of America included holiday spending tips in the report on the survey. Some tips for consumers include deciding on – and staying within – a spending budget, making a list of gifts and comparison shopping. Consumers also should pay of debts as quickly as possible and plan for next year by opening a Christmas Club account.
“Even those with tight budgets can survive the holiday season by enlisting their whole family in the challenge of living within an affordable budget for the month of December,” said CFA Executive Director Stephen Brobeck in a prepared statement. “And if it is necessary to finance purchases with a credit card, don’t borrow more than you can repay in several months.”
No Bank Holiday
The holiday season presents other kinds of challenges for banks, said Meghan Thompson, spokeswoman for Waterbury-based Webster Bank. Bankers have to deal with the increase in volume of all banking transactions, due both to holiday shopping and year-end activity, Thompson said. Fraud can also be an increased concern.
“Our employees are on alert to protect customers from fraud and to help them plan to for their holiday and year-end financial needs,” according to Thompson.
Connecticut state Banking Commissioner John P. Burke issued a statement Wednesday warning of fraudulent e-mails during the holiday season. People who shop online – as many have been doing since the start of the holiday season – are particularly susceptible, according to a statement released by the Department of Banking.
Burke specifically warned of phishing, a scam where fraudsters send e-mails that look like they are from banks asking customers to provide their account details.
“Don’t be tricked by an e-mail that appears to have been sent by your bank or credit card company,” Burke said in a prepared statement. “Banking institutions and online retailers do not request their customers provide to them their ATM card numbers, personal identification numbers or other sensitive information over the Internet.”
Americans spent $250 million online the day after Thanksgiving, excluding travel, according to Comscore Networks, an Internet research company, the Associated Press reported. That was up 41 percent from the $178 spent at the same time last year.
But big chains like J.C. Penney Co. and Sears, Roebuck and Co. were pleased with their store sales, although Wal-Mart Stores saw more disappointing results, according to the Association Press. The weekend is considered the most important shopping time of the year for many retailers and often is a benchmark for overall holiday spending.
“Friday overall was strong, but Saturday was weak and disappointing, so together it was only a modest two-day performance,” Michael P. Niemira, chief economist at International Council of Shopping Centers, told the AP. “Still, I continue to believe that this is not a bellwether for how the season will end up.”
Peter Gioia, an economist at the Connecticut Business and Industry Association, predicts this will be a good year for spending.
“It’s pretty clear that we’re going to have a good holiday season, but not a great one,” he said.
He expects about a 4 percent gain from last year, he said. Last year’s holiday season saw a 5 percent gain from the year before.
Factors like good consumer confidence and very good personal income levels will help the holiday season be strong, Gioia said, but concerns about energy costs and eventual rises in interest rates may keep some people’s spending at bay.
“So consumers are going to be concerned about that,” Gioia said.
Connecticut’s holiday spending will probably be a little less that national levels because job growth here has lagged slightly behind the nation’s, he said.