Islandia, NY ? The vast majority of Americans (88%) say that rising gasoline prices are a concern for them and their household budgets, according to the Cambridge Consumer Credit Index. Over half of Americans (54%) say that high energy prices are a major concern, 34% say high gas prices are a minor concern, and 10% are not concerned about the level of gas prices.
A year ago, the overall level of concern was the same, but slightly more Americans thought high gas prices were a major concern than think so today.
“The results of the Cambridge Consumer Index wildcard question indicate that even though gas prices have risen sharply in the past year, slightly fewer Americans are feeling pinched. 2% fewer Americans feel the higher gas prices are a major concern and 3% fewer will need to cut back their spending compared to June 2004. This is an indication that the economy has improved and consumer finances are generally in better shape now than a year ago,” says Jordan Goodman, spokesperson and financial analyst for the Cambridge Consumer Credit Index.
These findings are the result of monthly nationwide telephone polls of more than 800 adults, conducted by ICR/International Communications Research The most recent survey was made last week, and was sponsored by the Debt Relief Clearinghouse.
The overall Cambridge Consumer Credit Index fell by 6 points from May to 65. The Index fell on two questions: use of debt in the past month and plans for taking on debt in the next six months. The intent to take on debt in the next month rose slightly. The “Reality Gap,” which is the difference between the amount of debt consumers say they will pay off in the next month versus the amount of debt they actually paid off a month later, was 10 percentage points, down from a record 23 points in May. A month ago, 79% of Americans planned to pay off debt, while a month later only 69% actually did so.
The Cambridge Consumer Credit Index is a forward looking economic indicator gauging consumer spending and debt. It is released on the fifth business day of every month to coincide with the Federal Reserve Board’s G19 release of consumer credit outstanding data.
According to Chris Viale, President and C.E.O. of Cambridge Credit Counseling Corp., “Gasoline is a necessary expense for most Americans who commute. Unfortunately, consumers have little choice other than to cope with volatile fuel prices when they occur. Cambridge Credit encourages consumers to watch their spending and adjust their budgets to accommodate for fluctuating expenses such as gasoline and home heating.”
In conjunction with the Index, Cambridge Credit Counseling Corp. is releasing its monthly survey of people who have called in for credit counseling services over the past month.
Cambridge representatives ask callers for the primary reason they found it necessary to get help with their debts. From the 273 people who answered, this was the order of their responses:
- My income has been reduced from a lower salary, less overtime or layoff (33.0%)
- I am frustrated with high bank rates and fees (26.4%)
- I want to improve my ability to achieve future financial goals like buying a house or saving for retirement (14.6%)
- Other (7.3%)
- I got into too much debt by overspending (6.6%)
- Large medical expenses forced me to take on huge debts (5.8%)
- My lack of financial education caused me to take on too much debt (3.7%)
- Recently divorced or widowed (2.6%)
For more information on the survey see http://www.cambridgeconsumerindex.com/index.asp?content=client_survey.
The Cambridge Consumer Credit Index number is a composite of these three questions:
1. In the past month, have you taken on more debt or paid off debt?
The Index reads 62 on this question, down by 16 points from May.
In June, 31% of Americans say they have taken on more debt, with 24% taking on a little and 8% taking on a lot more debt. Conversely, 69% of Americans have paid off debt, with 48% paying off a little and 21% paying off a lot.
2. In the next month, do you anticipate taking on more debt or paying off debt?
The Index reads 48, up by 6 points from May.
In June, 24% plan to take on more debt, with 7% planning to take on a lot and 17% planning to take on a little debt. Conversely, 76% plan to pay off debt, with 56% paying off a little and 19% paying off a lot. In May, 21% planned to take on debt and 79% planned to pay off debt.
3. In the next six months, do you expect to take on debt because you are thinking of making a major purchase such as a car, education, appliance, medical procedure, furniture or carpeting?
The Index reads 84 on this question, down by 8 points from May.
In June, 42% of Americans plan to take on more debt to make such purchases, with 14% taking on a lot of debt and 27% taking on a little more debt. In contrast, 58% of Americans plan to pay off debt in the next six months, with 42% expecting to pay off a little and 16% expecting to pay off a lot. In May, 46% of Americans planned to take on more debt, while 54% planned to pay off debt.
“The results of the Cambridge Consumer Credit Index show that consumers are becoming increasingly cautious in taking on new debt. The amount of debt they took on in the past month dropped sharply, as did their plans to take on debt for major purchases over the next six months. The combination of high and rising gasoline prices and higher short-term interest rates on consumer loans is probably causing consumers to pull back on their use of debt,” says Jordan Goodman, spokesperson and financial analyst for the index.
The Index survey is conducted by ICR (International Communications Research) of Media, Pennsylvania over five days in the week before the Index is released. Over 800 households are polled based on random-digit dialing, with all demographic and regional groups in America fairly represented. The Index has a margin of error of plus or minus three and one-half percentage points.
