Consumers Expected To Refrain From Spending Early On In 2012

Thursday, January 5th, 2012

The 2011 shopping season saw a significant rise in consumer credit card spending. America’s Research Group has predicted that, as a result, early in the New Year consumer spending will dip to record lows.

This holiday shopping season, consumers put more purchases onto their credit cards as compared to the previous year. According to consumer payment data tracking company First Data, 7% more shoppers pulled out their plastic at the register in November and the first half of December 2011. The recent surge in the usage of credit cards over the holidays comes after a three-year period of credit cutback as households focused their attentions on reducing their debt.

While the increased reliance on credit reflects greater consumer confidence in their own personal economic situation as well as that of the country overall, it also is a testament to the success of credit card companies in steering consumers towards spending with a credit card as opposed to a debit card.

Frenzied spending during the weeks leading into Christmas inspired the National Retail Federation to make the prediction that sales would be 3.8% greater than that of the year prior to reach $469.1 billion, a record amount. While current balances are low when compared to pre-recession levels, high interest rates make it challenging for many to quickly pay down their debt.

According to data released by America’s Research Group, 2011’s Black Friday was so tremendously successful that some 44% of Americans admitted to blowing their holiday budget. Shopping online contributed significantly to the rise in holiday credit card usage. Sales made via the Internet, the vast majority of which are credit card transactions, rose from 16% in 2010 to 26% during the 2011 holiday shopping season.

ARG’s chairman Britt Beemer predicts that, “Shoppers will cut back in a very significant way relative to January and February of the last few years,” according to online news source twice.com. In fact, ARG expects post-holiday spending to decline to some of the lowest levels as seen in years making the anticipated “retail hangover” a bad one.

“Now that those credit card bills are hitting mailboxes shoppers will cut back in a very significant way relative to January and February of the last few years,” Beemer is reported to have said in a statement, according to Supermarket News.

He went on to forecast that unless consumers are availed of significant price reductions by retailers – in the realm of 70% off – they will likely hold off on making many new purchases throughout January and February and perhaps well into the spring.

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