American consumers are using tax refunds and lower gas prices to pay down debt and cover bills, not hitting the shopping malls, according to a new poll.
Of those saving money at the gas pumps, 58 percent are using those savings to cover basic necessities such as groceries and utility bills or to pay off debt, the latest quarterly poll from Allstate/National Journal Heartland Monitor found. Nearly one third of Americans — 32 percent — said that the decline in gas prices has had a “huge” or “significant difference” in their personal financial situations.
Thirty-seven percent of Americans surveyed said that their top priority for spending their tax refunds is paying off debt, 29 percent said they would put the money toward savings or investments, and 20 percent said they would use the money to pay for basic necessities. Only eight percent of respondents said that they would use the money from their tax refunds on non-essential purchases, according to the poll, the kind of purchases that could provide new fuel to the U.S. economic recovery.
Economists say that the numbers demonstrate that American’s still aren’t feeling secure about their employment and wages, but paying down debt could spur slow and steady growth with long-term economic benefits.
“I think the economy is better off, I think it’s more stable, people are more careful about how to proceed. What they do buy is probably going to lead to more permanent growth and stable growth,” said Gerald Hanweck, professor of finance at George Mason University’s School of Business.
Mr. Hanweck said that the poll reflected a general feeling of pessimism among consumers, as people remain uncertain about their job stability and are hesitant to use the money for non-essential purchases.
Despite historically low inflation rates, a vast majority of Americans surveyed were deeply concerned about the cost of living for necessities along with wages and income, with nearly 80 percent of respondents rating the U.S. economy as either “fair” or “poor” in those categories.
“Yes proportionally the population may be more optimistic about the future and future incomes but there is still a lot of pessimism and they’re worried about the cost of living,” Mr. Hanweck said.
Dan Mitchell, a senior fellow with the Cato Institute, said that although the U.S. economy is expanding, consumers are hesitant to loosen their wallets because the growth is so slow.
“Americans indicate in the poll that they still plan to be cautious with their savings at the pump and any tax refund they might receive,” said Ronald Brownstein, Atlantic Media’s editorial director, in a statement. “That fits with the pattern of restrained optimism we see throughout the poll.”
But by using the extra cash to pay off debts now, economists say that in the long term, Americans will be able to make more investments that boost the economy.
In fact, the poll found that for the first time since June 2013, more Americans believe the national economy will improve over the next year.
“In general people are getting more optimistic about the economy. As more and more people find jobs and the unemployment rate falls, more and more people say the economy is getting better. We definitely have turned a corner in terms of people feeling like things are looking better in the future,” said Alec Levenson, an economist at the University of Southern California.
The poll was conducted by FTI Consulting from February 18-22, 2015.
Pollsters conducted a phone survey with 1,000 American adults aged 18 and over, with 500 reached via landline and 500 reached via cellphone.