High Energy Costs Could Rein In Holiday Spending - Survey

A new survey says 35% of consumers expect to spend less than usual on holiday shopping this year, the highest figure in the survey's eight-year history. The survey was conducted by the Consumer Federation of America and Credit Union National Association. "The bottom will not fall out of retail but it will be softer," said Bill Hampel, chief economist at CUNA. The high cost of gasoline and home heating appears to be the main contributing factor. Of the 1,000 people polled, 38% said high fuel expenditures will reduce the money available for gift-buying, topping last year's 32% figure. Gasoline is about $1 more expensive per gallon this year than it was last, and Hampel said any further widening of that spread could have an "outsized effect" on spending. "You're going to take fewer trips to the mall if you're paying $3 or more a gallon," said Stephen Brobeck, executive director of the CFA. Other respondents cited the high price of gifts as a factor. Forty-two percent of households with incomes in the $25,000-50,000 range say they will probably cut back on holiday spending this season, but apprehension appears to be cutting across income lines. "We have high-income consumers that are a little nervous about spending money because of volatility in the stock market. The middle class are freaked out about the value of their homes, and then the lower-income consumer is strongly affected by gas and energy costs," said consumer psychologist Kit Yarrow. Retailers are throwing all manner of sales and promotions at consumers to lure them into stores. "They are kind of like desperate lovers courting the consumer," Yarrow said.

Sources: AP, U.S. News & World Report, CNNMoney.com, Reuters
Commentary: Retailers Seeing Consumer Credit Crunch Signs • Consumers May Not Get Christmas Bargains As Retailers Better Prepared • Wal-Mart's Q3 Strength Indicates a Weaker American Consumer
Stocks to watch: WMT, M, HD, JCP. ETFs: RTH, XRT, PMR

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