On shaky ground, consumers maintain their balance
After cutting back sharply in Q2 when gasoline prices spiked, consumers resume spending in Q3 for such day-to-day consumables as food, clothing, and medical expenses. Most consumers continue to avoid driving to save on gasoline.
Consumer buying plans rise for new cars and decline for used cars this quarter.
There is also a shift toward buying major appliances for the home rather than electronics (computers, TVs).
Plans to purchase airfare and lodging in the coming year decline.
Consumers considering buying a home in the coming year slip to a new low (6%), while current active shopping for homes matches the historic low (4%). Four in ten homeowners believe that their home lost value in the past three months, the highest percentage in two years of tracking this measure. Looking ahead to the next six months, slightly more consumers expect home values to rise than decline (30% vs. 25%).
Consumers’ Christmas spending plans are more encouraging in September 2011 than they were in September 2010. Consumers planning to spend more than last year are up four points (6% to 10%), while those planning to spend less are down seven points (55% to 48%). Clearly, consumers intend to reign in their holiday spending, but are not as resolved to do so as they were a year ago.
Consumers continue to hold the line on credit card debt. Slightly more decreased their credit card debt in the past month (22%) than increased it (20%), while the majority (58%) held steady.
Consumers contributing to their savings each month remain at a relatively high level (37%-38%) for a fourth consecutive quarter.
Consumer perception of inflation remains high, but not as high as last quarter when gas prices peaked. Two-thirds of consumers (68%) still report that prices in general have risen during the past month; as recently as Q4 2010, only 52% saw prices rising.
Nearly half (48%) of consumers say their financial situation is worse than it was a year ago, erasing the modest progress seen in the previous three quarters. Those saying their financial situation is better than a year ago dip to 17%, the fewest since 2009.
Fear of a potential layoff or loss of earnings rises for the second consecutive quarter and now stands at 59%.
Optimism about the coming year erodes for the second consecutive quarter. Consumers who< expect their household finances to be better a year from now decline from 41% in Q1 to 38% in Q2 and now 36%. Consumers who expect their finances to worsen during the coming year rise from 24% last quarter to 27% this quarter. Despite this trend, more consumers express optimism than pessimism about their household finances.
In the wake of the Federal budget deficit stand-off, Americans are more disillusioned with politicians in general. The percent who spontaneously name government as one of the nation’s major problems jumped from 34% in Q2 to 47% in Q3. Fewer Americans are pleased with the job President Obama is doing, down five percentage points from last quarter (41% to 36%); this is his lowest approval rating since taking office.
Many more Americans this quarter (72%) say things are getting worse for the country as a whole, up from 59% last quarter and the most since Q1 of 2009. Concerning the economy specifically, over half of consumers (56%) see things getting worse, compared to only 25% who see improvement. Just nine months ago, nearly as many consumers felt the economy was improving (36%) as felt it was worsening (40%).
Despite a dismal view of the nation’s current situation and direction, consumers do not necessarily expect things to get much worse for them personally. In fact, easing of gas prices has led to a small rebound in day-to-day spending. Consumers are exhibiting self-discipline in managing their tight budgets. They are keeping credit card debt in check and putting money into savings when they can. They are driving less and making trade-offs. While more consumers are considering a new car purchase, fewer are planning vacations. While more are shopping for household appliances, fewer are upgrading computers.
Marketers need to be creative to help consumers with the chess game of managing their finances. One approach is to make the purchase decision easier: no hidden or complicated fees, clear statement of savings and of the monetary value of product benefits, and so on. For example, expressing potential energy savings on new cars and appliances as estimated dollars saved over a given period helps consumers to decide what to buy and whether to buy now or later.
Another approach is to make explicit how a product or service addresses consumers’ higher priorities, such as the health and safety of their family, education of their children, financial security, etc. For example, consumers may be more likely to purchase a winter coat in their current frame of mind because it will keep a family member healthy and physically comfortable than because it is fashionable.