Consumer Survey Suggests Stable Holiday Spending

CHICAGO--(EON:Enhanced Online News)--Expectations for weak holiday spending could be overblown, based on responses by 2,570 Americans with household incomes over $35,000 to a survey fielded last month by The Boston Consulting Group (BCG).

“The doom and gloom is overstated. Unemployment is low. Real incomes are healthy”

“The doom and gloom is overstated. Unemployment is low. Real incomes are healthy,” said Michael J. Silverstein, a BCG senior partner and author of the bestselling Treasure Hunt: Inside the Mind of the New Consumer and Trading Up: The New American Luxury. “Consumers overall predict that this holiday season will be just as good, if not better, than last.”

“There are always exceptions. There is significant economic stress due to rising energy and commodity prices; mainly for households with incomes under $35,000. Middle-income consumers tell us they are optimistic about their futures and secure in their financial position.”

Holiday Spending Plans Are Similar to Those a Year Ago

Fourteen percent of Americans say they’re more likely to make a major purchase in the next three months and 36% of consumers said they were less likely to make a major purchase. The rest – 50% – said their spending would be unchanged. In last year’s survey, 23% said they would spend more, but 32% said they would spend less. In 2005, 40% said they planned to cut spending. (23% said they would spend more.)

Americans Say Weaker Housing Market is Not Changing Their Spending Habits

The vast majority of Americans – 74% – say fluctuations in housing prices haven’t changed their spending habits compared to last year. Only 17% say they spent less this year because of the real estate market.

In 2006, Americans were actually more apt to say real estate fluctuations were affecting their spending. Twenty-two percent said they would spend less because of house price volatility, and 67% said plans would be unaffected.

Posed with the question whether a 10% drop in housing values next year would impact their spending, more than three-quarters of Americans (76%) said it would not. In 2006, only 71% said it would not.

Further, most Americans – 51% – say they don’t feel affected by the current credit market, e.g., turbulence in mortgage rates and loan rates. In fact, an additional 16% say they don’t even think about the current credit market. (26% of Americans do say they feel somewhat squeezed by the current credit market. 7% feel very squeezed by the current credit market.)

In General, Americans Report Feeling Financially Secure

Nearly three-quarters (73%) of Americans said they currently feel very (19%) or somewhat (54%) financially secure right now. However, 5% did say they feel that they’re in financial trouble.

In the same vein, 70% of Americans say they feel secure in their current job.

Consumers Still Plan to ‘Trade Up’ to Higher Quality in Certain Spending Categories

“Trading up” to better products remains a strong part of American spending patterns, according to the survey. The top categories for trading up over the coming year will be personal computers, travel/vacations, bedding, meat, sit-down restaurants, kitchen appliances, the home in general, cars, furniture and home entertainment products.

“To trade up, people often trade down – find valuable bargains, that is – in other categories. American shoppers demonstrate smarts – in almost any economic environment. They have figured out retailers’ promotional cadence. They are forcing stores to launch pre-emptive sales. It’s definitely a season to be jolly about the good values that will be out there early and often. It’s a good time of year to be a consumer,” said Mr. Silverstein.

Survey Methodology

This Household Spending survey was conducted online within the United States by Harris Interactive on behalf of BCG between October 10 and October 23, 2007 among 2,570 US adults ages 18+ who have annual household incomes of $35,000 or more, of whom 2,060 have annual household incomes of $50,000 or more. Results were weighted as needed for age, sex, race/ethnicity, education, region and household income. Propensity score weighting was also used to adjust for respondents’ propensity to be online.

All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error which are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with nonresponse, error associated with question wording and response options, and post-survey weighting and adjustments. Therefore, Harris Interactive avoids the words “margin of error” as they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100% response rates. These are only theoretical because no published polls come close to this ideal.

Respondents for this survey were selected from among those who have agreed to participate in Harris Interactive surveys. The data have been weighted to reflect the composition of the U.S. adult population. Because the sample is based on those who agreed to be invited to participate in the Harris Interactive online research panel, no estimates of theoretical sampling error can be calculated.

Note: All questions reflect U.S. adults aged 18 and over with annual household incomes of $50,000 or more unless otherwise noted.

About Michael Silverstein

Michael Silverstein joined The Boston Consulting Group in 1980. He is a senior partner in BCG’s Chicago office and until recently was global leader of BCG’s Consumer practice. He holds an MBA with distinction from Harvard University and a BA from Brown University.

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 66 offices in 38 countries. For more information, please visit www.bcg.com.

About Harris Interactive^®

Harris Interactive is the 13th largest and one of the fastest-growing market research firms in the world. The company provides innovative research, insights and strategic advice to help its clients make more confident decisions which lead to measurable and enduring improvements in performance. Harris Interactive is widely known for The Harris Poll, one of the longest running, independent opinion polls and for pioneering online market research methods. The company has built what it believes to be the world’s largest panel of survey respondents, the Harris Poll Online. Harris Interactive serves clients worldwide through its North American, European and Asian offices, and through a global network of independent market research firms. More information about Harris Interactive may be obtained at www.harrisinteractive.com.

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