Younger shoppers spending beyond their means: D&B

Younger consumers are more willing to spend than their older counterparts but are relying on credit cards to do so, a new Dun & Bradstreet survey reveals.

The D&B Consumer Credit Expectations survey examines consumers’ expectations for credit applications, credit usage, spending and debt performance.

The survey, which was based on responses of 1226 Australians, examined expectations in the lead-up to the September quarter.

The survey reveals that almost a third of Australians will struggle to meet their credit requirements in the upcoming quarter while 37% intend to use credit cards to purchase something they could not otherwise afford.

Almost half of respondents aged 18-34 say they will use credit cards to buy something they could otherwise not afford, suggesting that young people are more willing to spend.

That compares to 38% of the 35-49 age group, who are prepared to buy something they can’t afford, while only 29% of those aged 50-64 have the same intention.

D&B chief executive Christine Christian says the data indicates that consumers remain heavily reliant on credit.

“Consumer concern about the effects of a rate rise on household finances does not seem to be deterring Australians from utilising credit. We have seen credit use remain consistent throughout the recession and beyond,” she says.

“The reliance on credit for household purchases, in spite of apprehension about their ability to meet these commitments, is worrying.

“In particular we are seeing the most likely demographics to use credit, particularly as a last resort, are also the least able to manage that debt.”

A breakdown of states reveals that people in South Australia and the Northern Territory are 21% less likely to say they’ll use their credit card to pay for things they otherwise could not afford compared to people in other states.

Fifty-six per cent of Western Australians are more likely to say an increase in interest rates will have a negative impact on household finances compared to 46% in NSW and 43% in Queensland.

The survey comes on the back of an announcement by department store David Jones that half-year profit could drop by 12%.

The retails chain said it expects sales for the fourth quarter to be down 11%, with profit after tax for the second half down between 9-12% from the second half of 2010 – resulting in a full year profit decline between 0.5-2%.

“The dramatic and rapid deterioration in trading conditions in 4Q11 has been unprecedented. As a result we are taking a cautious approach to 1H12 and have planned and forecast trading conditions to continue to be challenging,” David Jones chief executive Paul Zahra said.

“By resetting our sales budgets we will be better able to manage our inventory and variable costs.”

The announcement highlights how much pressure the retail industry is under and how vulnerable the economy remains to another interest rate rise.