Spending consumer Confidence Up

In this good news/bad news economy, an increase in consumer spending is fueling hopes that recovery is underway. The Federal Reserve recently reported that credit card debt increased by more than 3% in December, the first increase since August 2008. Many experts view this spending as a catalyst for growth, but does it reflect consumer confidence in the economy or are consumers reaching for the plastic because cash is tight?
Meanwhile, the Department of Commerce announced this month that consumer spending rose 0.7% in December, the sixth straight monthly increase. Consumer spending increased 3.5% in 2010, the best performance since the recession began.
Some experts forecast that consumers will have more money to spend in 2011 because of the deal reached between Congressional Republicans and President Obama to extend Bush-era tax cuts and reduce the payroll tax.
Will this extra cash translate to spending on bigger-ticket items? Spectrem Group surveyed investors with at least $500,000 in investible assets about what they plan to purchase this year. More than a third plan a major home improvement project, which is understandable at a time when the housing market is still struggling. Next on the wish list was personal technology such as iPads (38%) or a laptop computer (20%). Nearly 20% said they plan to purchase a new car.
This reflects a practical mindset. Tellingly, only 5% said they planned to purchase a second home or vacation residence.