Buoyant buyers point to a bumper Christmas despite interest rate rises

Christmas comes but once a year, and when it does we all spend more. Clifford German investigates exactly how much we spend, and what we spend it on.

The British economy may be slowing down inexorably under the influence of rising interest rates and the growing problems exporters face in selling profitably abroad because of the strength of the pound. But consumers, usually the last to know, are becoming increasingly confident and willing to spend, according to the latest survey of consumer confidence released today by American Express, the credit card company.

Three quarters of the people polled by the British Market Research Bureau International on behalf of American Express said they are as well off or better off compared with last year, and 40 per cent expect their financial situation will improve further over the next 12 months. The prospects for Christmas spending look particularly good, with 48 per cent of people saying they plan to spend the same as last year and one third expecting to spend more.

The average spend on food, presents and entertainment is likely to be about pounds 654 per head this Christmas. Men on average expect to spend pounds 733 each against pounds 582 by the average woman. Just under a quarter of men will spend pounds 1,000 or more, and 11 per cent say they will spend that amount on presents alone, but women expect to do most of the family shopping over the Christmas period, with a massive 86 per cent claiming to do most of the shopping.

Generously, shrewdly, wisely or tactfully, perhaps, 86 per cent of men say that their spouse or partner is extremely good at choosing their present, compared with only 40 per cent of women who lavish similar praise on their partners.

Almost one third of the sample admit to having received a windfall from a building society or insurance company demutualising this year, and 16 per cent of those who admit to having cashed in their windfalls already say they will still be using some of their windfalls to finance their seasonal spending.

John Calverley, the chief economist at American Express Bank, says, "consumers are in a buoyant mood. They feel better off than in the Spring, and are looking forward to a bumper Christmas. Still, the experience of the early 1990s and perhaps also the rise in base rates this year leaves consumers still cautious about borrowing."

The average person describes themselves as careful rather than carefree in their approach to Christmas spending. Just over 90 per cent said they keep a close eye on their finances, 85 per cent claim they only spend what they can afford, 80 per cent say they always try to save a proportion of their income each month and 89 per cent now say they always check their monthly bank or building society statement, up from 86 per cent in April this year.

Professor Cary Cooper, professor of psychology at UMIST in Manchester, says, "The Brits, who are working longer and harder than anywhere else in Europe, see Christmas as a time to reward themselves for their hard work throughout the year. But there is still a strong element of careful spending. This is in contrast to the late Eighties where the spend, spend, spend culture prevailed."

A remarkable 72 per cent of the sample said they would rather do without than take out a loan to finance their Christmas spending. But credit card holders expect to put 47 per cent of their Christmas spending on their cards, and four out of 10 admit they use their credit cards more over Christmas than at any other time of the year. Card loyalty schemes come into their own at Christmas with 45 per cent of cardholders saying they are planning to redeem their points over the Christmas period and use them to get presents for family and friends.

More than 80 per cent said that using their plastic was "more convenient" than other forms of payment, a similar number appreciated the "extra insurance" they obtained on goods bought with credit cards and just over two thirds welcomed the "ability to extend payments" and a similar proportion said it was "easier to return or exchange purchases if they had been made on credit cards rather than cash or cheques".

But 80 per cent do not plan to spend up to their credit card limit and 57 per cent say they expect to pay off their December statement in full next month.