More Americans now say they are loosening the purse strings in advance of the holiday season, and fewer say they are tightening their belts, according to a recent Citi national survey.
Only 35% said they would be spending less than last year, reflecting the lowest level of holiday budget cutbacks since the financial crisis. As many as 63% of Americans plan to spend more (11%) or the same (52%) on holiday shopping this year.
Consumers’ approximated holiday budgets have reached a high in comparison to recent years. Approximately 29% of Americans estimate they will be spending more than $1,000 this holiday season, up from 22% in 2011. Among 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,” stated Linda Descano, head of content and social, North America Marketing at Citi, and president and CEO of Women & Co., Citi’s personal finance resource for women.
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. Some 37% 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. And 27% of consumers feel that they are better off now than a year ago, up from 20% in August 2012. As the countdown to 2014 draws nearer, 69% of Americans are optimistic that their personal financial situation will get better in the year ahead.
Nonetheless, for 37% of Americans, up from 30% in August 2012, discomfort with their current level of debt weighs on their overall economic sentiment. Another 48% of Americans reported discomfort with their current level of savings for college, retirement, or a rainy day, further depressing an otherwise brighter economic perspective.
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% of families earning under $30,000 reported they are somewhat or very comfortable with their level of savings (down from 40% in June), while 43% of families earning $30,000 to $50,000 say they are comfortable (down from 55% in June). Similarly, just 51% of families with incomes under $30,000 report feeling comfortable with their current levels of debt (down from 55% in June), while comfort with debt among those earning $30,000 to $50,000 has dropped to 57% (down from 67% in June).
While consumers are eager to save, they are not taking full advantage of all of the opportunities to stretch their budget this holiday season, Citi noted. To manage holiday expenses, only one in five are comparing prices online and only 16% shopped early to get better deals. Social media listening, a key way to learn about good deals, is only currently being used by 8% of Americans. Credit cards with a price-back guarantee are only being used by 6% of consumers and only 5% are using their credit card reward points to purchase gifts.
American consumers have become financially savvy, already taking many steps to move their financial lives forward. To get their financial lives under control, 74% of consumers say they are paying their credit card bills on time and 68% are avoiding overdrawing their checking accounts.
With New Year’s Eve on the horizon, Americans are also resolving to improve their personal finances in 2014. While only 33% say they have already reached a savings goal, another 42% resolve to reach theirs in the year ahead. Just 39% say they were able to save and invest today, while another 41% resolve to save and invest more in 2014.