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Holiday Spending Is Doomed, Experts Say

Holiday spending is under pressure thanks to persistently high unemployment and economic uncertainty.

So expect a lump of coal in your stocking if you’re investing in consumer stocks this winter.

According to the National Foundation for Credit Counseling, the overwhelming majority of U.S. consumers plans to cut back on holiday spending — or even spend zero.

The results to the question “This holiday season I will …” were:

  • A. Spend as I did last year because my financial life is stable = 11%
  • B. Cut back on spending, since I am worse off financially this year = 53%
  • C. Spend more than last year because I am in a better financial position = 3%
  • D. Not spend at all, because I anticipate further financial distress = 33%

Seeing a great, big goose egg for holiday spending in some families is quite a disturbing sign, and a harsh reminder of the rough economic environment that has underpinned the recovery for stocks and the housing market.

Furthermore, the NFCC has hosted the poll on its website for the fourth year in a row, and the foundation claims there has only been a modest gain in optimism and spending dating back to holiday spending habits in 2010 right after the recession ended.

Here’s more from the National Foundation for Credit Counseling:

“Taken in totality, the four-year set of data reveals only a modest gain in consumer optimism toward spending from year one to date.  Combined with the fact that the Conference Board Consumer Confidence Index decreased sharply in October, it appears that consumers are still not inclined to begin spending, even for holiday purchases.

‘The statistics speak loudly, and underscore that consumers are not willing to repeat the mistakes of Christmases past by spending irresponsibly this year,’ said Gail Cunningham, spokesperson for the NFCC. ‘The persistently high rate of unemployment coupled with the long duration of unemployment are still very real challenges many people are facing.’

Looking at the other poll answer options, 11 percent intend to spend as they did last year, stating that their financial situation is stable, while 3 percent will spend more, feeling as though they are in a better financial position this year.  These numbers are identical to 2012 results.”

Holiday spending is obviously a big deal to retailers, so it will be interesting to see whether this survey — admittedly an unscientific, web-based one — bears itself out in actual consumer behavior.

More on Holiday Spending

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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