(New York, NY): Retailers saw one of the biggest jumps in consumer spending during holiday 2017, bringing cheer to retailers and issuers alike. But while holiday spending is typically indicative of consumer confidence and purchasing plans for the upcoming year, new research from Auriemma Group reveals that consumers don’t plan to increase their spending from 2017 levels. According to the new research, consumers generally feel positive about the country’s financial outlook, but enthusiasm for increased spending and borrowing on credit cards has waned compared to October 2016.
For example, 21% of consumers say they are likely to increase their monthly spend (down from 37% in 2016), only 16% plan on taking out a loan (down from 31% in 2016) and only 14% plans to increase borrowing on credit cards (down from 28%). When asked which purchases consumers anticipate making in 2018, the intention to spend in several categories decreased. For example, 43% of consumers plan to spend on vacations (down from 48%), 21% plan to spend on electronics (down from 36%), and 21% plan to purchase cars (down from 29%).
“Increased spending around the holiday season is normally predictive of greater consumer confidence and increased spending overall,” says Jaclyn Holmes, Director of Auriemma’s Payment Insights practice. “But these results show that merchants will need to be aggressive to court increased spending in 2018.”
The good news is that consumers generally feel that the U.S. economy is stable, with 43% of cardholders believing that the U.S. economy will be in the same condition one year from now, and 32% believing the economy will be better off. While the proportion who say the economy is good/excellent is comparable year-over-year, the proportion who describe it as “excellent” has decreased by half. A notable 25% percent believe the economy will be worse off one year from now. Although sentiments on the future of the US economy are, for the most part, positive, enthusiasm for borrowing is not.
Among all respondents, 69% say they are just as willing to borrow from banks in 2018, but only 7% are more willing to borrow from banks over this period, down from 14% who were more willing to borrow from banks in 2017. This appetite for borrowing becomes even more stark when considering the respondents’ future outlook on the economy.
Of those who feel the economy will improve in the next year, 16% said they were more likely to borrow in 2018, with 11% saying they were less likely to borrow. On the other hand, of those who believe the economy will worsen, 4% are willing to increase borrowing in 2018, and 53% say they are less likely to borrow.
“While the holiday season seemed indicative of more robust spending in 2018, it’s important that issuers have the right expectations for the new year,” says Holmes. “There are also many ongoing developments that will shape consumer spending in 2018, such as tax reform, which will need to be monitored closely.”
Auriemma plans to conduct further research in 2018 to provide the latest snapshot on consumer confidence and planned spend.
This study was conducted online within the US by an independent field service provider on behalf of Auriemma Consulting Group among 800 US adult credit cardholders in November 2017. Comparative data was fielded in a October 2016 study among the same population. The number of interviews completed for both is sufficient to allow for statistical significance testing among sub-groups at the 95% confidence level ±5%, unless otherwise noted. The purpose of the research was not disclosed, nor did respondents know the criteria for qualifying. The average interview length was 20 minutes.
About Auriemma Consulting Group
For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, call Jaclyn Holmes at (212) 323-7000.