October 6, 2006, 12:00 AM

Consumers’ spending intentions rise in October, reports Retail Forward

When house prices eased, some economists feared that shoppers would back off on their buying because they would have less home equity to tap. That does not appear to be the case, says the latest Future Spending Index from consultants Retail Forward Inc.

 

When house prices eased, some economists feared that shoppers would back off on their buying because they would have less home equity to tap. That does not appear to be the case, says the latest Future Spending Index from consultants Retail Forward Inc. Shoppers will increase their spending in October, Retail Forward predicts. The Future Spending Index stands at 99.1 in October, up from the 92.7 in September.

A number of factors converged to re-invigorate consumer buying, according to Steve Spiwak, economist with Retail Forward. "With gasoline prices dropping, the stock market hitting a new record and assessments of job prospects brightening, shoppers have become more enthusiastic about opening their wallets this month," Spiwak says. "This should provide some momentum heading into the crucial holiday shopping season."

Retail Forward cautions, however, that this year’s holiday shopping is likely to grow at a slower pave than last year’s. 64% of shoppers plan to spend the same on holiday gifts this year compared to last year, with Up Market shoppers most likely to spend the same amount.

Retail Forward reports:
• The Future Spending Index for Up Market households (incomes of $75,000 or greater) rose to 94.5 in October from 89.3 in September. Assessments of job security increased to their highest level since the first quarter. Reports of investment worth also jumped. And refinancing activity in this income segment increased as mortgage rates have fallen.
• Middle Market households (incomes of $22,500 to $74,999) also are more upbeat about the outlook, and for the same reasons as Up Market households. Job prospects, investments and refinancing all improved in this cohort. Concerns about mortgage debt loads also abated, as the pick up in refinancing made payments for many more affordable. The Middle Market index improved to 100.7 this month from 96.0 in the prior month.
• Results for Down Market households (incomes of less than $22,500) parallel the other two income groups. Better appraisals of jobs, incomes and investments, along with a rise in refinancing, have prompted the more optimistic outlook in this segment. The Down Market index increased to 106.6 compared with 92.0 in September.

For holiday shopping, 70% of Up Market consumers plan to spend the same amount as last year, with 63% of Middle Market and 52% of Down Market shoppers reporting they will not increase their spending. 12% of Up Market plan to increase their spending somewhat more or much more, as do 13% of Middle Market and 12% of Down Market shoppers.

As for online shopping, 52% of consumer plan to do about the same amount of online shopping this year as they did last year, with 14% planning to spend more online this year than last. 60% of Up Market households will do about the same amount of shopping online as last year, with 20% saying they will spend more online. 52% of Middle Market and 39% of Down Market households will do about the same amount of online shopping this year as last, with 13% of Middle Market and 11% of Down Market households increasing their online purchases. 24% of consumers said they do not shop online for holiday gifts, with 10% of Up Market, 25% of Middle Market and 35% of Down Market consumers saying they don’t shop online.

 

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