Consumers trimming spending plans, but less than expected, survey shows
Monday, November 5th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ The battered economy and terrorist events of the last two months have led some consumers to trim their holiday spending plans, but not as many as some experts expected, a new survey shows.
Despite a soaring unemployment rate, weakening consumer confidence, continued fallout from the Sept. 11 terror 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.
Of those polled, 28 percent plan to spend less this holiday season than last year.
In 2000, 56 percent of consumers said they planned to spend the same as they spent the previous year, while 24 percent planned to spend less.
``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 trade 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.
More Americans are paying off their debts or managing them more 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 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. One common definition of a recession is two consecutive quarters of declining economic output.
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 Tuesday. Economists fear that consumers could remain tightfisted, further weakening the economy.
The government reported Friday that the nation's unemployment rate soared to 5.4 percent in October, the biggest one-month jump in more than 21 years, providing the most dramatic evidence yet that economic fallout from the terror attacks probably pushed the country into recession. Over 400,000 jobs were eliminated during the month.
Many economists believe the jobless report significantly raised the odds of the Fed making a half-point rate reduction, rather than a more conservative quarter-point cut.
In Congress, Republicans and Democrats have been debating how best to stimulate the economy and what the right mix of tax cuts and increased government spending should be.
The survey of 1,019 adult consumers was conducted Oct. 25 through Oct. 28. It has a margin of error of plus or minus 5 percentage points.