The Fear Factor: Consumers Cutting Back When They Should Be Spending

There's no shortage of bad news when it comes to the economy - the recession, fears of deflation and elevated jobless claims are just some of the things that people are talking about. The widespread sentiment of doom and gloom has put a damper on the holiday season. But is slowed consumer spending a result of hard economics or is the psychology of hard times holding consumers back?

In a recent study released by the Pew Research Center, it was reported that 73% of Americans say they plan to cut back on their holiday shopping this year. Nearly six-in-10 of those who said they're cutting back report they're doing so because they worry things might get worse; only 28% said they are cutting back because their financial situation has deteriorated.

Sure, we all need to save more and spend less, but extreme tightening might be the worst thing that consumers can do in tough times, as stopping normal spending will only put more pressure on the weak economy.

In order to fight the fear factor, consumers should not fight the urge to splurge -- within reason of course. In fact, they should take advantage of falling gas prices to get out and about, take advantage of deep discounts in the stores and online for gift giving, and remember that giving this holiday season will lift spirits more than ever before.

Jackie DeAngelis is a writer and producer at CNBC. Previously she worked as a financial analyst at Oaktree Capital Mgmt. Jackie earned her J.D. from Rutgers Law School in 2008 and her B.A. in Asian Studies from Cornell University in 2002