Ohio State survey: Dropping consumer debt stress is good news for holiday shopping season

COLUMBUS, Ohio – Retailers have reason for good cheer during the last weeks of this holiday shopping season: Americans continued to feel less stress about their debts in November, according to a new survey.

This suggests consumers may be more willing to spend on gifts and other items this month, said Lucia Dunn, professor of economics at Ohio State University and one of the leaders of the Consumer Debt Stress Index (DSI) survey.

The DSI fell about 12 percent in November, the fourth straight month of decline. The DSI stood at 118 in November, compared to its October level of 130.1. That is the lowest DSI reading in the last 15 months.

"As news on the economy continues to be more encouraging, the debt that consumers have taken on is weighing less heavily on them," Dunn said.

"That's very welcome news for retailers who are hoping consumers feel confident enough to spend more freely this holiday season."

The DSI is conducted by Ohio State's Center for Human Resource Research and is based on telephone interviews of randomly selected Americans. Each month's index score is based on the past three months of interviews, with the average sample size being 673.

The DSI has been conducted monthly since January 2006, where its base value was set at 100.
Debt stress among Americans began increasing significantly after May 2007, around the time of the collapse of the subprime mortgage market, Dunn said.

From its historic low point of 90.3 in May 2007, the index climbed to its record high of 155.3 last July, which meant that consumers were experiencing debt stress levels that were more than 50 percent higher than when the index was started in January 2006. The DSI has been declining since.

"In spite of this good news and the optimistic outlook it brings, we should remember that debt stress remains considerably above May 2007, just before the collapse of the subprime mortgage market," Dunn said.

"We have some ways to go before consumers feel as confident about being able to manage their debts as they did before the recent economic downturn."

While women are still more stressed by their debts than are men, this gender gap is shrinking, the survey showed. Women's stress levels were 17 points higher than those of men in November, compared to 50 points higher in October 2008.

The decline in debt stress is also good news for Americans' family life, job performance and health, results from the survey suggest.

In November, 22 percent of respondents said that debt has caused medium to extreme problems for their family life, and 10.1 percent said that debt has caused medium to extreme problems for the job performance, both of which are down from October.

As far as their health goes, 20 percent of respondents said debt stress has had a negative impact, down 2 percentage points from October.

"Although this improvement is welcome news, the numbers are still troubling," Dunn said.
Overall, she said the November numbers suggest good economic news is buoying the spirits of consumers.

"In particular, more positive job reports have undoubtedly perked up consumers' psychology about their ability to manage their debts in the future," Dunn said.