Holiday spending could be OK

Associated Press

WASHINGTON — The battered economy and terrorist events of the past two months have led consumers to trim their holiday spending plans, but not as much as some experts expected, a new survey shows.

Despite a soaring unemployment rate, weakening consumer confidence, continued fallout from the Sept. 11 terrorist attacks and new worries about anthrax in the mail, 57 percent of consumers plan to spend the same amount for the holidays as they did last year, according to the survey released Monday by the Consumer Federation of America and the Credit Union National Association, a trade group for credit unions. That compares with 56 percent of consumers last year who said they’d spend as much as they did in 1999.

Of those polled this year, 28 percent plan to spend less this holiday season than last year, up from 24 percent in the 2000 survey.

"These results suggest that the contraction in holiday spending may not be as pronounced as we might have expected," Bill Hampel, chief economist for the credit union group, said at a news conference.

Furthermore, the survey showed a decline in the number of consumers worried about paying off their current and future debts.

A growing number of Americans are paying off or managing their debts effectively, said Stephen Brobeck, the consumer group’s executive director. In the survey, 38 percent of consumers said they are carrying credit card debt, down from 42 percent last year. U.S. household credit card debt is about $600 billion; the average interest rate on credit card accounts is currently around 14.6 percent.

Declining interest rates also appear to be a factor in easing consumers’ concern about debt, Brobeck said.

The economy shrank at a rate of 0.4 percent in the July-September quarter and economists are forecasting an even bigger drop in the current October-December quarter. Unemployment has soared to 5.4 percent, while consumer confidence is at a 7 1/2-year low.

To revive the economy, the Federal Reserve has cut interest rates nine times this year, with two reductions coming after the Sept. 11 attacks. Most economists predict another rate cut at the Fed’s next meeting today. Economists fear that consumers could remain tightfisted, further weakening the economy.

The survey of 1,019 adult consumers was conducted Oct. 25 through 28. It has a margin of error of plus or minus 3 percentage points.