Business Trends

Posts Tagged ‘consumer confidence’

Majority of Americans Pessimistic About Economic Recovery

In Uncategorized on December 23, 2009 at 10:35 pm

As 2009 comes to a close and Obama’s popularity dwindles, the majority of Americans are filled with significant uncertainty and anxiety about the state of the US economy – and its prospects for a quick recovery in the New Year.

Of the 1,000 Americans surveyed by telephone over the weekend by polling firm StrategyOne, nearly 9 in 10 Americans (87%) believe the US is still in a recession and 3 in 4 (78%) disagree with economic experts that the US is no longer in a recession.

Despite increasingly optimisic talk from experts about the health of economy, just 1 in 4 (26%) believe the economy will recover fully by the end of 2010. Instead, the majority of Americans – 51% – believe the economy won’t fully recover and be back on track until sometime until the end of 2011 – or even 2012. A frighteningly high 15% believe the economy will never fully recover.

“Consumers appear more likely to believe the economy has stabilized compared to the summer, but see a pretty long road to full economic recovery,” said Bradley Honan, Senior Vice President of StrategyOne, who authored the survey. “15% of US consumers believing a full recovery won’t ever take place speaks to how deeply scarred America has been left by the recession – and how the hangover is likely to last well beyond the ‘official’ end of the recession.”

The StrategyOne survey also found that slightly more people believe that the economy is on the wrong track (48%) than on the right track (44%), and most Americans believe the economy has either “not yet bottomed out and will get worse” (34%) or that “it’s at the bottom and not getting better or worse” (19%).

That’s not to say that opinions are not shifting more positively though, indeed they are. For example, Americans are not nearly as negative about the state of the economy as they were in July.

Today 42% say the economy has “bottomed out and is getting better” compared with just 30% who felt that way in July of this year. The current StrategyOne survey found that the youngest consumers polled, those 18-34 years of age, were most likely (50%) to believe the economy has already “bottomed out and is getting better” compared with just 38% of those 55 years and older, who feel the same way. There is clearly a significant generational gap about perceptions of the economy today.

“It’s clear some of the positive discussion about the economic recovery has broken through – but there is still much, much more consumers need to hear to regain their confidence in the direction of our economy,” said Bradley Honan of StrategyOne.

Survey Methodology:

StrategyOne conducted 1,000 telephone interviews among a representative sampling of Americans between December 16 and 20, 2009. The overall margin of sampling error at the 95% level of confidence is = +/- 3.1% overall and larger for subgroups. Statistical weights were designed from the United States Census Bureau statistics.

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Recession Creates New Holiday Shopping Trends

In Uncategorized on October 20, 2009 at 8:52 pm

Survey data from PriceGrabber.com, a part of Experian, reveals that the state of the economy is shaping new trends in holiday shopping. More than ever, comparison shopping is on the forefront of consumers’ minds, with 70 percent of consumers doing more research and comparison shopping online, compared with 38 percent last year.

Consumers are also crossing acquaintances (57 percent) and coworkers (53 percent) off their gift lists. Other findings from the PriceGrabber.com survey of 2,018 online consumers conducted from Sept. 24, 2009 to Oct. 12, 2009, reveal:

Consumers are cutting back — 53 percent plan to spend less

Many consumers have made a concerted effort to cut back over the last year due to the recession. A recent PriceGrabber.com survey revealed that these efforts will continue into the holiday shopping season and set the stage for new trends in holiday shopping. Fifty-three percent of consumers are planning to spend less than they did last year. Of the consumers who are planning to spend less this year, 48 percent reveal that one of the reasons that they are spending less is due to an increase in prices (necessities, gas, etc.), 45 percent cite lack of confidence in the economy, and 38 percent indicate making less money as a reason for spending less.

Shopping starts earlier to ease the impact of holiday spending — 22 percent start their holiday shopping in October

Cutting back on spending is not the only holiday trend being impacted by the recession. In past years, Black Friday (the day after Thanksgiving) has been the unofficial start of the holiday shopping season. This year, consumers are planning to start their holiday shopping long before Black Friday, with 22 percent of consumers starting their holiday shopping in October and 29 percent starting in November.

Gift lists are trimmed down to manage budgets — 57 percent are not purchasing gifts for acquaintances

Consumers are also making some significant cuts to the number of people on their holiday gift lists. When consumers were asked to compare this year’s gift list to last year’s, 57 percent of consumers revealed that they are not purchasing gifts for the acquaintances that they purchased gifts for last year. Fifty-three percent of consumers are not purchasing gifts for the co-workers that they purchased gifts for last year. When it comes to holiday spending this year, 36 percent of consumers expect to spend between $100 and $499, 28 percent plan to spend $500 to $999, and 30 percent anticipate a holiday spend of $1,000 or more.

Consumers are using more money-saving techniques — 50 percent shop at discount or outlet stores

This year, in order to meet holiday spending budgets, more consumers are utilizing money-saving techniques for their holiday shopping when compared with last year’s PriceGrabber.com survey, Holiday Consumer Spending Survey (2,641 respondents, conducted from Oct. 20, 2008, to Nov. 10, 2008). Fifty percent of consumers are planning to shop at discount or outlet stores this year, while only 43 percent did so last year. Twenty-nine percent of consumers are planning to purchase gifts for fewer people this year, while only 10 percent did so last year.

Record-Breaking Halloween: Sales To Reach $6 Billion

In Uncategorized on October 13, 2009 at 10:22 pm

Despite economic gloom casting a spell on consumer confidence this year, America’s darkest holiday is looking bright for retailers.  According to industry research firm IBISWorld, Halloween sales are expected to reach a record-breaking $6 billion in 2009, up 4.2 percent from the $5.77 billion generated last year. That’s contrary to the National Retail Federation’s prediction, which forecasts sales will decline to $4.75 billion.

“Economic recovery appears to be around the corner and consumers are enthusiastically looking to escape their recessionary woes,” said Toon van Beeck, senior analyst with IBISWorld.  “Even last year, when the outlook was much worse, the Halloween spirit remained unhindered as we saw total sales actually jump 5.1 percent from 2007.”

Halloween retail sales are comprised of a wide range of consumer goods, aimed at adults, children, and even pets.  These goods include costumes, scary make-up, wigs, Halloween decorations for inside and outside, and of course, pumpkins and candy, among other things.

In projecting this year’s total sales, analysts at the Los Angeles-based firm aggregated the retail-dollar performance of the following four traditional Halloween categories:

Category 2008 Revenue
(Billions)
2009 Revenue(Billions) % Change
Candy $1.77 $1.89 6.8%
Decorations $ 1.58 $1.65 4.4%
Costumes $2.07 $2.12 2.4%
Greeting Cards $0.35 $0.35              0.0%

It appears an increasing number of people are buying treats this year, making candy the fastest growing holiday category. The average person is estimated to spend about $22.50 on Halloween treats in 2009.

It appears an increasing number of people are buying treats this year, making candy the fastest growing holiday category. The average person is estimated to spend about $22.50 on Halloween treats in 2009.

Also fuelling this year’s record-breaking sales is the demand for holiday decorations.  With Halloween falling on a Saturday this year, more adults are expected to join the fun.  In fact, 32 percent of people celebrating the holiday will either host or attend a party. For this reason, IBISWorld expects decorations to reach its highest level yet at $1.64 billion.

“Halloween-related festivities are a growing trend and this is driving sales of decorations and candy,” adds van Beeck.  “Dollar and variety stores stand to benefit from the 4.4 percent increase in decoration sales, as consumers look to purchase cheap and disposable thrills to make a memorable evening.”

Call it escapism or just good, old-fashioned fun, Americans of all ages show the desire to go all out when it comes to dressing-up.  Costumes are expected to generate the greatest amount of revenue this Halloween, but growth is slight (2.4 percent) as consumers will apply more frugal but creative approaches when shopping.

”Despite more people participating in festivities, money is still tight and consumers will look to cut corners when it comes costume purchases,” said van Beeck.  “Instead of buying a packaged costume, which can cost up to $60 on average, people will get more eclectic and opt for cheaper individual items.”
But given the lack of growth for the card category, not all cheaper items will fare well this year. While cards did well last year, as consumers chose to cut back on pricier categories, 2009 expenditures will revert back to traditional shopping habits.

“Although unemployment is still very high, the overall outlook is far rosier today than it was this time last year,” adds van Beeck.  “For this reason, IBISWorld expects the upward trend in Halloween expenditures to continue its course for 2009, which despite economic conditions will prove to be the best year yet.”

The 2009 Verdict

America’s largest retailer of party goods, today announced its retail sales results for the five-week Halloween season ended November 7, 2009. Amscan’s retail sales include sales under its four retail banners, Party City, Halloween USA, Party America, and Factory Card & Party Outlet.

Retail sales for the five-week period ended November 7, 2009 totaled $257.4 million and were $11.6 million or 4.7% higher than the retail sales for the five-week period ended November 1, 2008, principally due to the growth and performance of the Company’s network of temporary Halloween USA stores.

During the five-week period ended November 7, 2009, the Company operated 247 temporary Halloween USA stores, as compared to 149 in 2008. In addition to its network of temporary stores, the Company operated 387 Party City and Party America “Big Box” retail stores (stores generally greater than 8,000 square feet), 59 smaller outlet stores and 161 FCPO stores during the 2009 Halloween season, as compared to 391 Big Box, 86 outlet and 171 FCPO stores during the 2008 season.

During the five-week Halloween season of 2009, the average sales for temporary Halloween USA stores increased by 7.5%, while the same-store net sales for the Company’s Big Box stores decreased 1.5%. Same store net sales at FCPO stores decreased 1.2%.

Commenting on these results, Gerry Rittenberg, Amscan’s Chief Executive Officer, stated: “In light of the current economy, the dire pre-Halloween predictions of the National Retail Federation and aggressive competition from other temporary Halloween stores, we are extremely pleased with these key holiday results.”

Additional links 
Candy Production: http://www.ibisworld.com/industry/retail.aspx?indid=234&chid=1
Gift Shops & Card Stores: http://www.ibisworld.com/industry/retail.aspx?indid=1099&chid=1
Greeting Cards & Other Publishing: http://www.ibisworld.com/industry/retail.aspx?indid=1235&chid=1
Formal Wear & Costume Rental: http://www.ibisworld.com/industry/retail.aspx?indid=1369&chid=1

Stricter Lending Criteria Causing Upswing in Used Vehicle Market

In Consumer Trends, economy, Uncategorized on June 10, 2009 at 4:47 pm

Stricter Lending Means A Shift Towards Used Vehicle Market

A struggling economy and stricter lending criteria have pushed more consumers toward used vehicle loans, according to a quarterly analysis of the automotive credit market released today by Experian Automotive.
Used vehicle loans accounted for 68.13 percent of all automotive loans in the first quarter of 2009, up from 64.3 percent of all automotive loans in the first quarter of 2008. Share of loans for new vehicles fell to 31.87 percent in the first quarter of 2009, compared with 35.7 percent in the first quarter of 2008.
“Banks, credit unions and captive finance companies appear to have tightened their lending criteria as they look to mitigate risk,” said Melinda Zabritski, director of automotive credit for Experian Automotive. “Loans are still available, but lenders are changing terms. This is pushing some consumers out of the new vehicle market and into the used vehicle market. Some finance companies that specialize in subprime loans have seen their share increase as traditional lenders move away from riskier loans.”
Independent used vehicle dealers — those dealers not affiliated with a specific manufacturer — were the biggest winners in the first quarter, seeing their share of used vehicle loans rise from 31.58 percent in the first quarter of 2008 to 34.97 percent in the first quarter of 2009. Independent dealers typically serve customers with lower credit scores and are gaining share as traditional lenders tighten their loan criteria.

Other findings include the following:

 -Loans 30 days past due were up 11.3 percent year over year in the first quarter of 2009, while loans 60 days past due were up 19.5 percent.

 -Currently, 2.48 percent of all automotive loans are 30 days past due, compared with 2.22 percent in the first quarter of 2008. Automotive loans 60 days past due rose to 0.82 percent from 0.69 percent.
-Consumer credit also has worsened in the past year, with the percentage of consumers who are considered prime decreasing by 2.6 percent. Conversely, the percentage of highest-risk consumers grew by 6.03 percent.

-Minnesota, Connecticut, Wisconsin, Iowa and Massachusetts boasted the highest average credit score for new vehicle loans in the first quarter, while New Hampshire, Connecticut, Minnesota, North Dakota and Wisconsin had the highest average credit score for used vehicle loans.

Los Angeles based market research firm IBISWorld estimated that over the last five years, industry revenue  for Used Car Dealers in the US increased at an average annualized real rate of 0.4. Although there has been a decline in the number of used cars and light trucks sold over the five year period, the average selling price has increased, which has led to growth in industry revenue.

Rise In Gas Prices Altering Consumer Behavior

According to research conducted by Kelly Blue Book in May 2009, the leading provider of new and used car information asked what consumers thought will happen with gas prices in the next month. The results? 87 percent of new-car shoppers said they thought gas prices would go much higher, a significant jump from the 66 percent who thought gas prices would increase just a month earlier.

In both April and May, more than 60 percent of in-market new-car shoppers said that rising gas prices have either caused them to change their minds or made them think about vehicles they normally wouldn’t have considered. When asked what they would be most likely to compromise in their next new-vehicle purchase in order to save money they might need to spend on fuel, shoppers cited engine size (for example, a four-cylinder versus a V6 or V8) as the top item likely to be sacrificed, followed closely by vehicle size (for example, a mid-size sedan versus a large sedan).
In addition, 73 percent of those who saw gas prices increasing in May said they plan to change their spending habits if gas prices were to go much higher.
“As summer approaches with household budgets still pinched by the weak economy, car buyers are once again becoming very conscious of rising gas prices,” said Jack R. Nerad, executive editorial director and executive market analyst for Kelley Blue Book and kbb.com. “While we may not see the $5-per-gallon gas experienced in some areas last year, current economic conditions compounded by the pain at the pump may make $3-per-gallon gas a new threshold for car buyers – the point at which they change their mind about what vehicle to buy and how they spend their money.”

Frugality an ongoing financial strategy with Americans

In Uncategorized on May 26, 2009 at 4:37 pm

Amid reports that retail spending is picking up and the economy may be stabilizing, American families say they are looking beyond the eventual recovery to a more frugal future that embraces pinching pennies and saving money as a desirable and permanent financial strategy.

The First Command Financial Behaviors Index indicates that the majority of April respondents are embracing a more fiscally conservative philosophy in their personal finances. Three quarters of respondents believe the United States was “too wasteful” before the recession. They now say that “when I save and invest my money instead of spending it, I feel like I’m doing the right thing” and “a disciplined saving mentality brings me peace of mind.” More than half (58 percent) agree that “the current economic situation will have a long-term effect on my spending behavior.” And perhaps most promising, half say they have embraced frugality as a way of life.

“Americans are showing encouraging signs of a fundamental, long-term shift in their approach to personal finances,” said Scott Spiker, CEO of First Command Financial Services, Inc. “After years of living in a consumption-fueled economy, consumers are rediscovering the time-tested values of prudence and self-reliance. This change signals a slower but healthier recovery. And that should be celebrated. What we don’t need are encouragements from government or Wall Street to spend, spend, spend. Rather, the time has come for Americans to embrace a new frugality.”

This new attitude is emerging at a time when the American outlook on personal finance is improving. More than one-third (38 percent) of April respondents indicate that their personal financial situation is stable, a 17-point increase from October 2008. Almost half (46 percent) of respondents say they are still “cutting back even though I do not need to.” Only 34 percent say they are looking forward to “the economy rebounding so my spending habits can go back to normal” and just 10 percent feel that living paycheck to paycheck “is a perfectly acceptable way to live.”

Americans continue to cut back by reducing leisure activities (53 percent), attempting to reduce utility bills (49 percent), reducing clothing purchases (48 percent), shopping at discount stores (48 percent), increasing their use of coupons (46 percent), reducing holiday spending (45 percent), reducing travel (43 percent) and bringing their lunch to work (40 percent). Among those who are cutting back, 26 percent said that it is out of necessity and two-thirds (66 percent) said that it is “preparatory.”

Signs of a new frugality can be gleaned from the way Americans are handling their federal tax refunds. Out of those respondents who have received a refund, 45 percent say they will put the money into savings and investments and 40 percent say they are using their refund dollars to pay off debt. First Command’s ongoing research reveals that a disciplined approach to savings and paying down debt tends to increase feelings of optimism and financial security.

“As the ratio of savings to debt increases, so do feelings of financial security,” Spiker said. “The savings-to-debt ratio is perhaps the most significant contributor to feelings of financial optimism, for as one’s savings-to-debt ratio increases—meaning more savings, less debt—feelings of financial security increase, and feelings of being financially stretched decrease. The numbers make it clear that having a reasonable savings-to-debt ratio makes a person feel better about the present and more optimistic about the future.”

Relatively few consumers who have received a tax refund say they will spend it on such non-essential items as consumer purchases (16 percent), vacations (9 percent) and dining out (3 percent). Look for more of this type of frugal spending behavior in the months ahead. Less than one quarter (23 percent) say they “will stop cutting back once the economy is back on track.” The percentage of Americans who have cut back for good is on the rise, from 14 percent in February to 16 percent in March and to 18 percent in April. An additional 16 percent of Americans in April said that they will continue to cut back for 2 to 10 years.

“These results suggest that those who think spending levels will return to past highs anytime soon are living in a dream world,” Spiker said. “The average American has regained fiscal sanity, and that’s a good thing. We’re not likely to see a genuinely healthy economy unless Americans are spending and saving wisely.”

Compiled by Sentient Decision Science, LLC, the First Command Financial Behaviors Index assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 1,000 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 3.1 percent with a 95 percent level of confidence. www.firstcommand.com/research