Around 39.4% of consumers said theyd think about trimming spending

Around 39.4% of consumers said they'd think about trimming spending

US consumers are likely to think about trimming their spending following yesterday's interest rate rise, an analyst has said, with many fearful of further rises.

The US Federal Reserve on Wednesday (16 December) increased the range for its benchmark interest rate to between 0.25% and 0.5%, from the previous range of 0%-0.25%. The rise, it said, was part of a "gradual" process to get rates back to normal after years of being near zero.

A survey carried out by retail analyst Conlumino ahead of the announcement found that almost 66% of US consumers believe the increase will be the first of many step-ups in the official rate. 

"Logically, the future direction of rates is no more uncertain now than it was 24 hours ago, but that is not how consumers see it," said Conlumino CEO Neil Saunders.

Around 39.4% of consumers said that, in light of a rate rise, they would think about trimming their spending, even if only slightly. Saunders believes, however, that many would not follow through on such an action, but some will, which will be "broadly unhelpful" to retail and to the economy, at least in the short term. 

"This is not least because the number planning to cut spending far outweighs the 10% who say they are likely to loosen the purse strings following a rate rise," Saunders explains. 

"Despite this, it is a harsh truth that no matter how much they have benefited many consumers, interest rates could never realistically stay at 0.25% forever. What is more questionable, however, is the timing of the rate rise, which comes ahead of the all-important festive spending period."

Saunders believes the impact on the dollar, which is likely to strengthen against other currencies, could be more unsettling for retailers, even though the anticipation of a rate rise has already been partially priced in. 

"Across the course of this year the strength of the greenback has put a significant dint in the earnings growth of retailers with overseas interests, a position that looks likely to worsen as we move into 2016," he said.

"Over the short term it is likely that this, rather than the impact on the consumers, will be the main disadvantage of a rate rise for the American retail economy."