Nearly seven out of ten US consumers (68%) are feeling optimistic about their financial situation for 2006, with 30% being 'very optimistic', according to the latest Experian-Gallup 'Personal Credit Index' survey.
The December 2005 Personal Credit Index score is up 11 points from November's record low of 74 (on a 100 point scale). December's index of 85 is the highest score since August 2005, according to Ed Ojdana, group president for Experian Interactive.
Other positive consumer expectations for the coming year include higher pay, promotions at work, and an improved credit score. More than half of employed consumers (57%) said they look forward to earning more money next year than this year, while only 6% expect to see a decline in their pay. A surprising 30% of workers also anticipate getting a promotion.
More than one-third of consumers (36%) also hope to earn a higher credit score in 2006 while only 2% think their credit score may decline. The remaining 62% expect their credit score to remain about the same.
New year changes
When thinking about the new year, consumers anticipate the following:
- Making home improvements (50%);
- Paying off all their debt (38%);
- Buying a new car or other vehicle (21%);
- Moving to a new place at least 10 miles away (20%);
- Going back to school - e.g. further education (19%);
- Getting a new job (18%);
- Buying a new home (13%);
- Among those with a mortgage, refinancing their home (6%).
Age differences
The decision to go back to school is highly correlated to age, with almost half of consumers (47%) under age 30 anticipating more studying in the coming year, compared with 24% of consumers in the 30 to 49 age group and only 4% of consumers age 50 and older.
The under-30 consumers also are more likely than older consumers to be looking for a new job, moving to a new location and buying a new car. Almost two-fifths (39%) of younger consumers expect to find a new job in 2006, compared with only 14% of consumers aged 30 or over. Also among young consumers, 44% expect to change their place of residence and 32% look forward to buying a new car (compared to older consumers at 15% and 18% respectively).
Credit trends
On a separate issue, the poll found that 14% of consumers who have a credit card pay only the minimum amount, in effect using the card as a high-interest loan. In a similar Experian-Gallup poll last December, only 7% of consumers used their credit card that way.
"It's worrying that twice as many consumers are using their credit in this fashion compared to last year," said Dennis Jacobe, chief economist for The Gallup Organisation. "The past year's devastating natural disasters, general price increases and record energy costs may have caused more consumers to put day-to-day items on their credit card, and they haven't caught up with their finances. This also could be the result of the increase in minimum credit card payments by credit card issuers. Nevertheless, the proportion of consumers who are uncomfortable with their level of debt remains at about one in four: 26% this year, compared to 25% last year."
But the survey found that the overall amount of credit card debt has declined slightly since last year. Currently, the average debt stands at US$4,072, compared to last year's figure of US$4,243. About one-third of consumers reported credit card interest rates of 15% or more (no change from last year).
Domestic expectations
In examining housing prices and petrol prices for 2006, after massive rises in 2005, consumers appear relatively sanguine: While more than half (53%) expect both prices to be higher, only 16% expect petrol prices to be "much higher" and 14% expect housing prices to be "much higher".
For additional information:
· Visit Experian at http://www.experian.com
· Visit Gallup/PCI at http://www.personalcreditindex.com