Discover Card Survey: Christmas Spending to Fall 15%

Dear readers, I posted this story about 18 hours ago, but my server went down briefly, and this offering was a casualty. The reason I included it was that, according to Google News, it had been picked up only by a few overseas news outlets, like the Turkish Press and the Straits Times, and here by Alternet and Raw Story, hardly bastions of financial reporting.

But if this survey is borne out, a 15% fall in holiday spending would be a blow to retailers and a concrete sign of a deepening consumer retrenchment. And 18 hours later, no more news outlets have picked up this item. Is there a ration of how much bad economic news is permitted per day, and this fell outside the quota?

From AFP:

Cash-strapped US consumers plan to spend about 15 percent less on Christmas gifts in 2009 than they did last year, a credit industry research group reported Wednesday.

On average, shoppers are expected to spend 723 dollars on holiday presents this year, compared to 831 dollars in 2008 and 896 dollars in 2007, Discover Financial Services said.

Women will outspend men slightly, dishing out an average of 742 dollars compared to 702 dollars, according to a survey by the credit group.

Some 47 percent of consumers reported plans to spend between just 100 and 500 dollars on their holiday shopping, while a quarter said they will spend between 500 and 1,000 dollars.
Nearly half (43 percent) of subjects surveyed said they plan to spend less on holiday gifts than they did last year.

About two-thirds of respondents (63 percent) said they are very worried about the state of their personal finances, a decrease from last year, when 74 percent of recession-hit shoppers reported similar concerns.

Note that even though fewer consumers are freaked out about their finances, the respondents plan to clamp down even harder on their spending this year. That suggests spending patterns are inertial.

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  1. charcad

    Maybe this is related, then. Yesterday I received a spontaneous and unsolicited increase in my AMEX credit line.

    I guess they did this for me being a 22 year “member” in good standing with a perfect payment record. Just like they previously cut it down for me being a 21 year member in good standing with a perfect payment record.

    Has anyone else had line of credit increases showered on them this month?

  2. Doc Holiday

    I love mysteries. I looked all over for the story too and it looks like the Obama/Bush Team has sucked into the Large Hadron Collider (along with the rest of the money in our financial system). However, there are UFO’s at this site from Roswell New Mexico…. where it is rumored that Santa is being held hostage by bankers with large elongated heads.

    Re: “”Finding the perfect gift is never easy, and this year shoppers will be looking for ones that also fit within their budgets,” said Ryan Garton, director of customer insights for Discover Financial Services.

    “Holiday shoppers looking for extra savings this year can take advantage of cash rewards from Discover,” said Garton. “Cardmembers can receive double Cashback Bonus on purchases made on their Discover card anywhere”

    >> I have the perfect XMAS gift; a credit card shredding machine:

    1. Doc Holiday

      After spending several intense moments @, I searched for the term Christmas gifts @ Discover, and this is what came up (which is one reason I gave up posting crap like this):

      As of September 30, 2009 there were 542,814,731 shares of the registrant’s Common Stock

      Capital Adequacy
      The Company became subject to capital adequacy guidelines of the Federal Reserve in the second quarter 2009 upon becoming a bank holding company.

      Effective July 2009, the Company and the Bank began consolidating the trusts for purposes of computing regulatory capital as a result of actions taken to provide incremental credit enhancement to the trusts, which are discussed in greater detail in Note 5:

      In the first half of 2009, substantially all of the securities issued by the trusts were placed on negative ratings watch by the rating agencies. To address these ratings watches, in July 2009 two new subordinated classes of securities, Series 2009-CE certificates and Class D notes, were issued by DCMT and DCENT, respectively.

      The Level 3 category includes the Company’s retained interests in the form of Class B and Class C notes issued by DCENT, which are reported in available-for-sale investment securities. Prior to the fourth quarter of 2008, the Company’s valuation of these investments utilized the discount rate reflecting bid-ask spreads derived from observable transactions for similar securities. At August 31, 2009, and in accordance with FSP FAS 157-3, the Company utilized a discount rate reflective of the implied rate of return as of September 25, 2008, the last date on which the Company considered the market for these assets to be active, adjusted for incremental changes occurring thereafter in liquidity risk. The Company considered the following factors in concluding that the market for subordinated tranche credit card asset-backed securities remained inactive at August 31, 2009, since September 25, 2008:

      Primary market credit card asset-backed securitization transactions averaged $6 billion to $9 billion monthly from the beginning of 2006 through May 2008, decreasing to a level of approximately $4 billion per month through September 2008, followed by a lack of primary issuance transactions altogether after September 25, 2008 (excluding issuances to related parties). The Federal Reserve’s Term Asset-Backed Securities Loan Facility (“TALF”) has favorably impacted the issuance volumes of triple-A rated securities in 2009, however; primary market transactions for lower rated credit card asset-backed securities, specifically A-rated and BBB-rated securities, remained closed as of August 31, 2009.
      The Level 3 available-for-sale investment securities category also includes investments in third-party credit card asset-backed securities and the Company’s investment in asset-backed commercial paper notes of Golden Key U.S. LLC. The estimated fair value reported for the credit card asset-backed securities of other issuers reflects the low end of market indicative pricing based on a small number of recent transactions. The fair value of the commercial paper notes of Golden Key U.S. LLC reflects an estimate of the market value of those assets held by the issuer, which is primarily reliant upon unobservable data as the market for mortgage-backed securities has continued to experience significant disruption.
      Also included in the Level 3 category are cash collateral accounts deposited at the trust as credit enhancement to certain transferred receivables against which beneficial interests have been issued and the interest-only strip receivable, both of which are included in amounts due from asset securitization. The Company estimates the fair value of the cash collateral accounts utilizing the discounted present value of estimated contractual cash flows. The Company estimates the fair value of the interest-only strip receivable based on the present value of expected future cash flows using management’s best estimate of key assumptions, including forecasted interest yield, loan losses and payment rates, the interest rate paid to investors, and a discount rate commensurate with the risks involved.

  3. psychohistorian

    I believe that we are in the beginning of a period that might be worse than the depression.

    It is looking like consumer consumption in American has finally hit a wall (it is about time, some would say). The overburden of debt is and will continue to stifle consumption from being 70% of GDP and the inverse multiplier effect on jobs will continue apace. If trade remains open there will be an international rush to the bottom for labor costs associated with making, growing, servicing the baseline subsistence economies of the world. The amount of labor needed to produce the baseline is less than the sum of all nations’s total labor force and hence the pressure on wage rates and since the US has the highest labor costs, their low capability workforce will be hit the hardest. Since the cost of living in the US is high there may be enough pain and suffering to cause public display of discontent.

    If trade is limited, more US labor will be used to produce what isn’t purchased offshore but the associated crash of the dollar will destroy the equity of everyone but the rich. This direction also doesn’t bode well for limiting military conflicts between groups of nations competing for resources.

    Where is my supply of Hopium?

  4. Doc Holiday

    “Capital Adequacy”

    Here we are, December 2009 and FDIC has closed 130 banks because of “Capital Adequacy” mis-management. FDIC suggests that 552 banks are at risk of going in the crapper; which is the highest banking failure rate since 1993, when the nascent political agency red-flagged 575 banks. Some analysts suggest the failure rate for banks during this period of excess corruption will be far higher.

    Bank Failure Friday and the weekly reminders from FDIC just seem boring now and economic stimulus buffoonery falls on deaf ears — but does anyone see any kind of a pattern there with FDIC and bank failures? Are the extra large jig-saw puzzle pieces so large that only drooling idiots are allowed to play this mindless game (my apologies to anyone in the Fed or other tainted agency)?

    IMHO, inflammatory swearing and belligerent hostility is in order at this point, because I’d seriously like to know WTF was going on with FDIC between the years 1993 and 2005. To be fair, go here to the FDIC Time Machine: where some historical context can be used to give the chaotic puzzle some order.

    I realize that I’m tossing out a huge amount of dog years there, almost unlimited in anyones ability to grasp, but somehow, during the blow-up of the S&L bubble and then the resulting popping — FDIC had its collective pants down around its ankles (as far as they could go). The highly soiled FDIC was frozen in some kind of a fusion-like dream trance, caught between being zombie idiot/retards (on one-hand) while actually playing the realistic role of sophisticated financial engineer crooks (on the other hand) who were seemingly actively involved in wide-spread collusion and fraud. Any way you dice the FDIC facts, a lot of crap was going down around them and obviously, these guys were looking the other way during the S&L building boom.

    So — fast forward the FDIC time machine to about 2002 +/- or about 63 dog years … and as if watching a frame-per-frame instant replay, FDIC is caught on High Definition with its collective panties bunched up around its collusive ankles (again) and once again, knee deep in financial feces, with the same happy faced smile …. that once again forces me to bring up the exact same recurring notion that the same retarded or (highly corrupt) people at the FDIC somehow willfully and blissfully ignored the concept of “Capital Adequacy” for the entire U.S Banking System — for a decade! WTF?

    So this is Christmas, 2009, and what have we done? FDIC is doing us all a huge service by shutting down 100’s of crappy banks that somehow slipped through their tainted stinking fingers — but, suddenly, FDIC is back in the business of regulating and cleaning up our latest systemic failure, just like a group of heros, versus being taken to task by an inept group of morons collectively addressed as congress (see Mark Foley).

    Nonetheless, I’m wondering why FDIC is designed to ignore its mandate to regulate banks during periods of corrupt boom periods and then provide a unique service of banking consolidation after the bubbles pop? It seems as if the FDIC is not retarded at all, but a partner with wall street, AKA The Mafia and thus FDIC is simply a clearing house to launder money for the Fed or organizations that need to play with hot money (see TARP).

    As Wiki provides: “As the Clearing House concentrates the risk of settlement failures into itself and is able to isolate the effects of a failure of a market participant, it also needs to be properly funded in order to ensure its survival in the event of a market event”.

    FDIC is perhaps the biggest bank robber of all ….

    That does it!

    Out you two pixies go,
    through the door or out the window.

    Look, Nick, what’s wrong?

    And that’s another thing.
    Where do you come off calling me Nick?

  5. Richard Kline

    Yves: “Is there a ration of how much bad economic news is permitted per day.” 0%. It’s an accident if any real facts or news makes it onto the pages or out of the mouths of the US media propacastors. The ‘happy talk’ of this autumn reminds me of things like the Phoney War period in WW II. At best. And why not: Wall Street is raking it in on a rigged market, so the top 10% are hale. You got a problem with that???

    Hopium; in need. Turn on yer TV set, and inhale bro. Big Money has all the fumes you need to stay slumped and passive. “No. 1 Gass,” is what it’s called, piped from the sewers of power direct to us all . . . .

    1. psychohistorian

      My TV set (propaganda machine) has been disconnected from the world for over 10 years. I am an aging techie and have been choosing my news from the internet since its beginning.

    2. fresno dan

      “0% It’s an accident if any real facts or news makes it onto the pages or out of the mouths of the US media propacastors.”
      Ha, Ha!
      I would say there are plenty of facts reported – sport scores, temperatures, accidents, floods. But that would only take 5 minutes, and they got another 23 hours and 55 minutes to fill (whoops!!!! half the time is commercials, so I will amend that to say they have another 12 hours and 55 minutes to fill with opinion, conjecture, speculation, uninformed questions…but mostly lunecy).

  6. DoctoRx

    DECEMBER 10, 2009, 11:47 P.M. ET Stores’ Dilemma: To Deploy Discounts Now or Hold the Line

    . . . The first week of December, typically a lackluster time in the wake of Black Friday, was particularly slow. Sales for the week ended Dec. 5 fell 18% from the prior-week period, which included Black Friday, according to market researcher ShopperTrak RCT Corp. Last year, when the recession was in
    full force, sales fell a lesser 14%, according to the firm, which compiles shopping traffic at malls and uses sales statistics, as well as Commerce Department figures, for its estimate.

    “After solid traffic the first couple of days, it looks like the middle of August out there,” said Stephen Baker, vice president of industry analysis for retail watcher NPD Group.

  7. Lilguy

    I find that surveys of consumer’s intent are usually too far off base to be of much value. Consumers (and others) simply don’t behave the way they say they are going to.

    I certainly don’t look for anything like a 15% downturn in holiday retail sales this year. My gues is that they will be roughly in line with last year’s–plus or minus a percent or two. At this point the downward pressures (increasing unemployment, consumer deleveraging, etc.) are roughly equal to the upward pressures (wealth has stabilized–even improved–if only temporarily, people more optimistic about the future).

    It won’t be a good holiday sales season for retailers and a large number will go belly up come January, but there won’t be a steep decline (or incline) in sales. To me, the most significant change will be the continuing aggressive shift to e-purchases–saving both consumer money & a lot of the hassles of holiday buying.

  8. Ina Pickle

    Lilguy, I cut way back. I made all the presents that I’m giving to the kids’ teachers; I made what I’m sending to my parents. I kept presents for siblings and their kids below $10. I’m shipping the whole mess to my mother, because she can parcel out the items to the family who will assemble there (saving on shipping). The in-laws are scattered, but I’m making their presents, too.

    For my children and my spouse, I likewise kept it to a minimum. Normally my kids have one large gift and two small ones under the tree (in addition to what they get from Santa, who fills the stocking and gives a few additional small things). This year will feature one present under the tree per kid, and none of the presents is over $30. It is likely that my children will each open 5 or fewer presents total — from everyone — on Christmas morning.

    I would agree that people SAY what they expect the questioner wants to hear, or what will make them sound virtuous, when they are asked. That probably has nothing to do with what they will actually do when no one is watching (or there would be nowhere near as many donuts sold as there are!). But when you ask the average mother in late November what her plans are regarding Christmas gifts, you are probably discussing a fait accompli, or at least you are talking to someone who has given it some serious thought. People vary widely in their approach, of course, but I guarantee you that my friends, family, and I are done shopping and were by December 4.

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