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Even before passage of tax reform bill, it appears holiday spending will be up due to Americans hitting big on the credit card

Even before passage of tax reform bill, it appears holiday spending will be up due to Americans hitting big on the credit card

While consumer confidence most likely took a big jump after Wednesday’s passage of the new Tax Reform and Jobs Act, it appears that Americans were feeling pretty good already about the future as seen in what is likely to be a very good holiday shopping season when all is said and done.¬† However there is one big caveat to this, as most of the spending has been on credit, which continues the trend over the past several years of consumers spending beyond their means.

Even though consumer confidence cooled for a second straight month in November, CNBC is reporting that holiday spending for the average American household is on track to be the highest in 12 years.

Amazingly, the¬†CNBC¬†All-America Survey found that¬†the average family will spend $900 for the first time in the 12-year history of the poll,¬†eclipsing last year’s estimate of $702 by a wide margin.

Furthermore, the survey of 800 American households Рwhich has a margin of error of plus or minus 3.5 percentage points Рfound a surge in the percentage of Americans planning to spend more than $1,000. The number climbed to 29%, up from 24% last year.

But before economists and retail analysts begin recalibrating their expectations, it‚Äôs worth noting that much of this spending will be funded by debt. Another study by RentCafe which examined spending habits of American renters discovered that,¬†in the 50 largest US metropolitan areas, the average renting family will go into debt due to holiday-related expenses, debt that must be paid off in the opening months of the following year. –¬†Zerohedge

Use of credit to pay for Christmas shopping surged over 18% in the past thirteen weeks, with much of this tied to the hope that Congress would finally get tax cut legislation passed.  And to make matters worse, overall consumer debt in America is now at an all-time high, with credit card debt alone over $1 trillion.

While some companies have already publicly stated they are going to use the new tax reform to boost wages of their employees, as well as potentially boost the economy further with Capex expansion, it will take a long while for economic growth to make up for the years in which stagnant wages and under 3% GDP growth forced consumers to have to use credit as a means of survival.¬† And sadly, this doesn’t take into account the potential of higher inflation which would only add to their burdens.

Kenneth Schortgen Jr is a writer for The Daily Economist, Secretsofthefed.com, Roguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.


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