Holiday spending increased despite stagnant economy

Holiday spending exceeded predictions in 2011 despite a sluggish economy, according to a national Gallup Poll study.

Self-reported consumer spending increased 4.1 percent during the holiday season, which lasts from the day after Thanksgiving until New Year’s Day. The National Retail Federation had predicted a 3.8 percent increase.

Grant Monahan, president of the Indiana Retail Council, said Indiana tends to track national trends.

“When the season began, projections had an increase of about 2.8 percent over last year,” Monahan said. “And then as the season began, it was really going much better than anticipated.”

Monahan said his reasoning is based on his own speculation as well as anecdotes he’s heard from colleagues.

He said the nature of the holiday season itself lends itself to spending to buy gifts for friends and family.

“People may change their holiday spending budgets, but for the most part they’re going to go out and spend,” he said.

Monahan cited “pent-up demand” as a cause for the increase. Consumers may have cut back spending during the year, so they splurged during the holidays, Monahan said.

“They were buying items for themselves as well, and I think that’s really part of that pent-up demand,” he said.

Monahan said another component of this demand was increased credit card use.

“I think with the tough economy people have been…more disciplined with regard to their credit card use and were using debit cards and cash more,” Monahan said.

By using credit cards, consumers could put off paying bills and therefore spend more, he said.

Consumer Jenn Hugenberg said she went against this trend and spent less this holiday season.

“I made sure I got gifts that they wanted and would use but that were cheaper,” she said.

Hugenberg said that this wasn’t intentional, however.

“It just kind of happened,” she said. “I just feel like I got what I wanted to get people, but it wasn’t as expensive as I thought it would be.”

The Gallup poll said one factor that remains to be seen is whether the overall profit for businesses will suffer from this season due to deep discounts and sales.

“How profitable retails went this year still remains to be seen,” Monahan said.

A last factor that needs to be considered is the use of gift cards. It was a record year for gift card sales, Monahan said. Those still need to be redeemed, which will give a boost to profits in upcoming weeks.

What all of this means in regard to the economy as a whole remains to be seen. Faith in the economy still remains low among consumers, with unemployment and underemployment still high. Confidence in the government also remains at a record-low among consumers, according to Gallup.

Monahan agreed with this.

“Hopefully, they’ll be back to shopping in 2012,” he said.