Tag Archive for: consumer confidence

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While Holiday Shopping Hit Record-Setting Numbers, Consumers Don’t Expect to Continue the Trend Throughout 2018

(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.

 Survey Methodology

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.

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Young Consumers More Likely to Spend Gas Savings

(New York, NY): Most consumers have more money in their pockets thanks to lower gas prices, but younger people are more likely to spend their savings, according to research from Cardbeat®, Auriemma Group’s syndicated research publication. In a survey of 421 U.S. credit cardholders, one-third (34%) of consumers under age 45 say they’re now considering making previously postponed purchases, compared to just 20% among their older counterparts.

Many consumers’ personal finances are buoyed by lower oil prices. Close to two-thirds (62%) of drivers say they’re spending less on gas than they were a year ago, and 88% cite the lower cost of gas compared to a year ago. Yet caution permeates consumer behavior and varies considerably by age group. Consumers aged 45 and older, who remember rising gas prices during the OPEC oil embargo and Gulf War years, are more likely to see low fuel prices as a temporary phenomenon. Cardbeat data shows individuals aged 45 and older are more pessimistic in their outlook for the price of fuel going into the future, with 69% feeling the price of gas will go up in the next year, as opposed to 59% among respondents under age 45.

Major card payments networks validate that the impact of lower gas prices on card spending has been modest so far. For example, in January 2015, MasterCard CEO Ajay Banga told investors in the company’s quarterly earnings call, “We haven’t [yet] seen the extra savings from lower gas prices translate into additional discretionary consumer spending.”

The consensus among many economists is that we could start witnessing more discretionary credit card spending this summer (barring any unforeseen increases in gas prices). Marianne Berry, Managing Director of the Payment Insights practice at Auriemma, says that merchants would still be wise to presume a cautious consumer would be the rule for the foreseeable future, and target their promotions to the younger consumers who would most likely be receptive to such offers.

She adds that certain merchant categories, most notably restaurants, are likely to be the first beneficiaries of any incremental spending. “Consumers anticipate their highest increases in spending will be on food and dining over the next year” said Ms. Berry. ”After restaurants, retail in general, particularly fashion and electronics, are likely beneficiaries of discretionary spend among Millennials and Gen Xers.”

About Auriemma Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information about Auriemma’s research, please call 212-323-7000.

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Auriemma Research Suggests U.S. Holiday Spending Will Be Up Slightly in 2014

(New York, NY):  As we approach the 2014 holiday season, there are signs for cautious optimism on consumer spending.  For example, the U.S. has experienced slow but steady economic growth for the past several years, and the national unemployment rate stood at 5.8% in October according to the U.S. Bureau of Labor Statistics, which the agency notes has not been that low since July 2008.

Auriemma Group, a leading consulting firm in the payments field for the past 30 years, believes 2014 holiday spending is likely to show slight increases over 2013 holiday spending levels.  According to recent research conducted in Cardbeat,® Auriemma’s syndicated research report derived from a web-based survey of credit card users in the U.S., more than half (52%) of respondents say they will be increasing the amount they spend this season.  However, the biggest increases will come from the youngest consumers, who begin at a lower dollar amount of spending.

“Barring any unforeseen factors such as weather, 2014 holiday spending should show a moderate overall increase,” says Marianne Berry, Managing Director of Auriemma’s Payment Insights practice.

She adds that Auriemma’s ongoing research shows that many U.S. consumers have working been to deleverage their personal balance sheets, so many are in better fiscal condition than they have been in years.  However, in the absence of rapid income growth, it’s hard to envision just what might drive a big jump in overall sales.  ACG’s annual forecasts of holiday spending have proven directionally correct over the past decade.

One bright spot for the banking and payments industries, she says, is that more consumers (81% in 2014 vs. 72% in 2010) this year say they’ll plan on using credit cards to pay for their holiday purchases, although it’s worth noting that only a portion of this group will carry balances on any of their credit cards.  Cardbeat data suggests that about 60% identify as revolvers, with 38% who occasionally revolve, and 22% who revolve frequently.

By many accounts, forecasts for 2013 holiday spending growth failed to materialize, with industrywide holiday sales growth for 2013 being the slowest since 2009.  Severe weather conditions in much of the U.S. last December, along with fewer holiday shopping days between Thanksgiving and Christmas 2013 adversely impacted consumer spending.

For 2014, the National Retail Federation forecasting November-December 2014 sales (excluding autos, gas and restaurant sales) to increase by 4.1%.  By comparison, Gallup’s spending estimate suggests an increase between 2.2% and 3.5% in 2014 U.S. holiday retail sales, and the organization says that the most likely outcome will probably be around 3%.

About Auriemma  Group

Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space.  We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines.  For more information about Auriemma’s research, please contact 212-323-7000.

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