A majority of US consumers are likely to maintain or increase current spending levels – especially on basics – in the next 30 days, while young professionals and the affluent will up their spending in a broader number of discretionary categories, according to results from the newly introduced American Express Spending and Saving Tracker (pdf) study.
The survey, which asked consumers to compare spending priorities now vs. a year ago,? revealed that 60% of overall respondents are willing to spend the same or more in the next 30 days (compared with the past 30 days), while 40% plan to spend less. However, the general population is increasingly willing to spend more on essentials such as groceries and car maintenance, while young professionals and the affluent also put a high priority on non-essentials such as travel and dining out.
Young Professionals, Affluents Open Wallets Wider
Young professionals are most optimistic about the current state of the economy and most likely to increase spending during the next 30 days, with 24% indicating they will do so, writes Retailer Daily. Those who plan to spend more intend to increase spending on clothing (65%), dining out (54%) and travel (53%).
Similarly, 14% of the affluent plan to increase spending during the next 30 days, compared with 10% of the general population, Amex said. The affluent who expect to spend more say? their increased spending will be on travel (56%), dining out (47%) and clothing (43%).
General Population Focuses Mostly on Needs
Among the general population, about one-half of consumers who expect to spend more said they are putting priority on groceries and clothes (49% each).
- Of the general population, 42% named car maintenance as a high priority this year, compared with 5% last year.
- Interestingly, one luxury expense, salon hairstyling and grooming (as opposed to a more basic haircut), was a high priority for 46% of the general population this year, compared with 18% last year.
- Among the general population, the greatest number of consumers said their top priority expenses one year ago were vacations (25%) and dining out (24%). Today, only 7% named vacations as a high priority and dining was named as a high priority for only 8%.
- Pet care, sports activities and home cleaning are also areas consumers said they are putting less spending priority on this year:
- Health and home expenses – such as buying organic food and home maintenance – are on the rise even as consumers trade down or out on other items.
Young Professionals Make Large Purchases
Young professionals are most willing to make large purchases of more than $500, with 38% saying they plan a large purchase in the next 30 days, compared with 24% of the affluent and 15% of the general population.
Young professionals also plan to spend more on large purchases ($2,460) than the affluent ($2,170), the study revealed.
Holidays Won’t Come Early
Consumers also appear to be showing restraint when it comes to early holiday shopping. When asked what discount level would motivate them to begin their holiday shopping at retail stores in the next 30 days, the overwhelming majority (69%) say they would not be motivated by a department store discount. Of that group, 44% feel it is too early to start holiday shopping, including 52% of affluent and 48% of young professionals.
From Spenders to Savers
Mirroring the fact that US personal savings rates have moved from negative territory to 4% in July, the survey found that consumers’ intend to strengthen their household balance sheet. When asked what they would do with $500 of found money, one-third of consumers said they would pay off their regular monthly bills. One-in-four said they would apply it to pay off credit card debt or save it (26% each).
When comparing responses of the affluent with the young professionals:
- 33%? of young professionals would put found money toward their credit card debt, compared with 26% of the affluent.
- More young professionals than affluents would use the money to go on a shopping spree (16% vs. 6%).
Among the 40% of respondents who said they would spend less in the next 30 days, the top three reasons were “trying to save money,” “reducing debt,” and that they “have the money but feel now is not the time to spend.”
Empathy Breeds Frugality
When asked what has been the most significant impact of the economic downturn, the overwhelming majority of the general population (74%) cited “seeing family and friends affected by the recession.” More people cited this reason than “losing their job” (30%), “losses in the stock market” (54%), and “losses in retirement or 401K savings” (56%), said Amex.
Other consumer spending and expectations indices mirror the findings from Amex’s spending tracker. September results from the RBC CASH Index reveal that consumers remain cautious about spending and pessimistic about employment. The majority (63%) have themselves, or have had someone in their inner circle, affected by job loss.
Another private consumer index, the Deloitte Consumer Spending Index, also gives an optimistic view of consumer spending trends. The Deloitte Consumer Spending Index rose 23% in August 2009, climbing from 2.39% to 2.94%. This is the highest mark the Index, which attempts to track consumer cash flow as an indicator of future consumer spending, has hit since reaching 3.07% in October 2007.
The Conference Board Consumer Confidence Index increased from 47.4 in July 2009 to 54.1 in August 2009, driven in large part by the performance of the Expectations Index, which measures consumer expectations for the next six months. The Expectations Index rose from 63.4 in July to 73.5 in August, with more consumers taking a positive view of short-term business conditions and employment prospects.
However, some recent data released by the federal government is less rosy in its outlook on consumer spending. According to the Bureau of Economic Analysis, U.S. consumers showed little change in their personal spending or earning habits, although personal saving dropped 5.6%, indicating possible increased willingness to spend.
Recent consumer credit and borrowing figures indicate that consumers are having a harder time obtaining lines of credit to finance purchases. Total US consumer, revolving and non-revolving credit rates all fell dramatically in July 2009, while consumer borrowing fell about 20% in June 2009.
About the index: The American Express Spending & Saving Tracker research was completed online among a random sample of consumers aged 18 and older. The research sample of 2,032 adults surveyed the general U.S. population, as well as two sub-groups–the affluent and young professionals. Interviewing was conducted by Echo Research between August 28- 30, 2009. Affluent respondents are defined as having a minimum annual household income of $100K. Young professional respondents are defined as those less than 30 years old with a college degree and a minimum annual household income of $50K.