As Americans check holiday presents off their lists and get ready for the holiday season, more say they will increase spending and fewer say they are cutting back on expenses, according to the results of a recent Citi national survey, conducted by Hart Research. Only 35 percent said they would be spending less than last year, reflecting the lowest level of holiday budget cutbacks since the financial crisis. Sixty-three percent of Americans plan to spend more (11 percent) or the same (52 percent) on holiday shopping this year. Consumers’ approximated holiday budgets have reached a high in comparison to recent years. Twenty-nine percent of Americans estimate they will be spending more than $1,000 this holiday season, up from 22 percent in 2011. Amongst those planning on shopping for the holidays, Americans will spend an average of $968, up $60 from 2011. “It’s reassuring to see spending on the rise, since the increase in Americans’ holiday budgets may indicate a more optimistic outlook towards making financial progress in 2014,” said Linda Descano, CFA®, Head of Content and Social, North America Marketing at Citi, and President and CEO of Women & Co., Citi’s personal finance resource for women. Economic Outlook Hits High Point but Anxiety about Debt and Savings Grows Too In June 2013, the Citibank Economic Pulse entered positive territory for the first time since its inception in 2009. The sustained rise from -17 in the summer of 2011 to +1 in the summer of 2013 represented a strong sign that the American economy was recovering and consumers were regaining confidence. The Citibank Economic Pulse decreased from +1 to 0 this quarter, reflecting that discomfort with debt and savings levels weighs on consumers’ minds and tempers their positivity. When asked to reflect on their local economic conditions and personal financial standing, more Americans have a positive outlook. Thirty-seven percent of Americans rate the condition of the economy in their area to be good or excellent, reflecting the highest levels of positivity since the Citibank Economic Pulse began in 2009. Twenty-seven percent of consumers feel that they are better off now than a year ago, up from 20 percent in August 2012. As the countdown to 2014 draws nearer, 69 percent of Americans are optimistic that their personal financial situation will get better in the year ahead.
Nonetheless, for 37 percent of Americans, up from 30 percent in August 2012, discomfort with their current level of debt weighs on their overall economic sentiment. Another 48 percent of Americans reported discomfort with their current level of savings for college, retirement, or a rainy day, further depressing an otherwise brighter economic perspective.Outlook among Lower Income Households Remains Negative Lower income Americans’ sentiment declined this quarter, but remains far more upbeat than in recent years. The Citi Economic Pulse is -18 among those earning under $30,000, 2 points lower than in June 2013, but substantially better than when it sunk to -29 at the depths of the downturn in August 2011. For families earning $30,000 to $50,000, the Pulse dropped to -5, down 8 points from June 2013, but substantially higher than -24 in August 2011. Debt and savings levels similarly weigh heavily on the minds of lower income families. Only 33 percent of families earning under $30,000 say they are somewhat or very comfortable with their level of savings (down from 40 percent in June), while 43 percent of families earning $30,000 to $50,000 say they are comfortable (down from 55 percent in June). Similarly, just 51 percent of families with incomes under $30,000 report feeling comfortable with their current levels of debt (down from 55 percent in June), while comfort with debt among those earning $30,000 to $50,000 has dropped to 57 percent (down from 67 percent in June). Gift Wish List from a Wealthy Secret Santa Even in their imaginations, Americans are focused on mitigating their discomfort with their savings and debt levels and are practical about their dreams. When asked what they may want from a very wealthy Secret Santa, lavish gifts such as jewelry, a new wardrobe, plastic surgery, or a new car, fell to the bottom of list while more practical choices rose to the top. Americans said they would want a house or new place to live (23 percent) or have their credit card bills paid off (19 percent). The next most popular response, a vacation, came in at 15 percent.
Stretching Holiday DollarsWhile consumers are eager to save, they are not taking full advantage of all of the opportunities to stretch their budget this holiday season. To manage holiday expenses, only one in five are comparing prices online and only 16 percent shopped early to get better deals. Social media listening, a key way to learn about good deals, is only currently being used by 8 percent of Americans. Credit cards with a price-back guarantee are only being used by 6 percent of consumers and only 5 percent are using their credit card reward points to purchase gifts. The principal coping strategy for the holidays is to have a budget and to stick to it. Nearly half (45 percent) of consumers employ this strategy while others say they have a general idea of what they will spend but do not track every penny. Only 18 percent of Americans have committed to spending whatever it takes to ensure their families have a happy holiday. “Americans may be leaving some simple holiday money-saving options on the table,” added Descano. “By comparing prices online, using credit card rewards to purchase gifts, and using social media to find the best deals, many still have time to stretch their holiday budget this year.” Moving Forward and Organizing Financial Lives American consumers have become financially savvy, already taking many steps to move their financial lives forward. To get their financial lives under control, 74 percent of consumers say they are paying their credit card bills on time and 68 percent are avoiding overdrawing their checking accounts. In order to properly position themselves for the future, the majority of Americans (71 percent) say they have been organizing their finances and more than half (59 percent) say they have adequate life insurance. More than half of Americans are protecting themselves against identity theft (56 percent), using mobile banking to keep track of their finances (54 percent), automating online bill-paying (52 percent), maintaining an emergency fund (52 percent) and signing up for paperless financial statements (51 percent).
With New Year’s Eve on the horizon, Americans are also resolving to improve their personal finances in 2014. While only 33 percent say they have already reached a savings goal, another 42 resolve to reach theirs in the year ahead. Just 39 percent say they were able to save and invest today, while another 41 percent resolve to save and invest more in 2014. Thirty-six percent say they have an “up-to-date” will, with an additional 32 percent resolving to ensure they have one in the coming year.Americans of all ages are preparing themselves financially for the future, including Millennials. Millennials are the youngest demographic in the workforce and many seem to know they need to do more to prepare for their financial futures. They say they are resolved to do more in most areas of financial improvement in 2014, with 42 percent resolving to have a formal financial plan (compared to 29 percent of the general population) and 50 percent resolving to get a higher paying job (compared to 27 percent of the general population). About The Citi Economic Pulse The Citi Economic Pulse is calculated by subtracting negative responses to each item from the positive responses for 8 Pulse items, divided by 8. The 8 Pulse items include: current condition of the economy in area; business conditions in area over the next twelve months; current employment opportunities in area; buying climate for big ticket items; personal financial situation compared to a year ago; outlook on personal financial situation for the next twelve months; comfort with current level of savings; and comfort with current level of debt. The Pulse scale can range from +100 (if every respondent gave positive response to each of the 8 questions) to -100 (if all respondents expressed consistently negative views). Hart Research Associates conducted the telephone survey of 1,817 adults from November 14 to November 20, 2013. The overall statistical margin of sampling error is ±2.31 percentage points for the main sample and is higher among subgroups.
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