Sharp decline in confidence about personal finances and the
economy during second half of October erases Index gains built since
August; Monitor stands at 96.5
RIVERWOODS, Ill.--(BUSINESS WIRE)--Nov. 7, 2007--More consumers
are expecting to increase their spending next month according to the
Discover(R) U.S. Spending Monitor(SM), reversing a five-month trend
that consistently showed consumers less willing to spend more. The
increase in spending comes despite a strong mid-month reversal in
consumer confidence about their personal finances and the economy. The
decline kept the Monitor nearly on par with last month. Surveying of
15,500 random consumers (500 every night of the month) completed on
Oct. 31 put the monthly index at 96.5, just .6 ahead of last month's
The mid-month decline started the week of Oct. 17 after confidence
had been rising for five consecutive weeks. During the last 14 days of
the month, assessments of the economy and personal finances sharply
declined, as did the number of consumers reporting they would have
money left over after paying this month's debts. But budget pressures
and a lack of optimism about the economy don't appear to be stopping
consumers from spending more next month. However, consumers appear to
be spending out of necessity rather than by choice.
More Consumers Expecting to Increase Spending in November; Many
Managing Their Spending to Meet Household Expenses
In October, more than 35 percent of consumers said they expected
to spend more in the next month. This was up more than six points from
September's Monitor and was the first spending increase we have seen
since the Monitor's May inception. The increase was across the board,
among all age groups and income levels with younger adults (over 42
percent) and families (over 46 percent) showing a seven and 10 point
increase, respectively from last month's survey.
But the Monitor shows evidence that basic household expenses like
gas, groceries and mortgage payments may be what is driving consumers
to spend more. Nearly 43 percent of the survey's respondents, compared
to 35 percent last month, said they expect to spend more on household
expenses. Those expecting to spend the same on household expenses
dropped nearly seven points to 47 percent.
The spending reversal from the previous months coincides with
October news of record oil prices and a continued housing slump.
"Last month and well into this one we saw stable readings on
spending patterns, but this month we saw a remarkable turn in spending
intentions nearly coincident with news of record oil prices and
continued coverage of weakness in the housing and mortgage
industries," said Margo Georgiadis, executive vice president and chief
marketing officer for Discover Financial Services. "Consumers are
adapting accordingly, and are spending more on the things they need
while keeping spending in check when it comes to discretionary
purchases and other expenses."
Discretionary spending like dining out and going to the movies
practically remained the same as last month with 55 percent expecting
to spend the same or more next month. Consumers expecting to spend
more on discretionary expenses did inch up over a point from
September. Nearly 56 percent of consumers are expecting to spend the
same or more on major personal purchases in November, the same as
October. And those expecting to spend more on home improvement
expenses declined slightly to 53 percent.
Majority of Consumers Still Managing Their Budgets to Have Money
Left Over, but Warning Signs Appear During Second Half of October
For the month of October, nearly 52 percent of consumers expected
to have money left over after paying monthly bills. This number was
virtually unchanged from September and marks the fourth straight month
where a majority of consumers expected to have money left over. But
warning signs appeared during the last two weeks of October as less
than half of consumers polled during this time period expected to have
money left over. And while those expecting an added expense or income
shortfall edged up only slightly from September for a monthly average
of 36 percent, the last two weeks of October showed an additional 2
point increase to more than 38 percent.
"Increased spending at the pump and on groceries may be leaving
less wiggle room in consumers' budgets," said Georgiadis. "The survey
showed consumers having a harder time successfully managing their
budgets towards the end of October. Having money left over affects
spending confidence, and in the month ahead, it will be interesting to
see if consumers continue to have difficulty managing their budgets as
we approach the holiday spending season."
Of the majority of consumers who did have money left over, nearly
80 percent believe they will have the same or more money left over
than last month. Consumers also increased their savings for the third
consecutive month as 63 percent said they were planning on saving the
same or more, slightly higher than last month and a point higher than
The one-point increase in savings since August comes as a growing
number of consumers indicate they are closer to living on the edge.
Over the last two weeks of October, there was a nearly three- point
increase (from over 46 percent to over 49 percent) in the number of
people who reported being able to maintain lifestyles for only up to
one month if they had a sudden loss of income.
Overall Confidence in Personal Finances, Economy Unchanged in
October, But Sharp Declines Mark Last Two Weeks of October
Consumers' confidence in their personal finances and the economy
followed a similar path in October as their confidence in managing
their budgets. During the week of Oct. 10, more than 34 percent of
consumers felt their personal finances were getting better, one of the
highest numbers ever reported for the Monitor. But consumers'
attitudes soured during the second half of October. Confidence in
personal finances dropped four points in two weeks, as only about 30
percent said they were expecting their personal finances to get better
during October's final week. For the month however, over 31 percent
felt their personal finances were getting better, more than a point
above September's number.
Early October also showed marked improvement in consumers'
attitudes about the economy with more than 21 percent saying the
economy was getting better, the first time this number has been above
20 percent since July. But as October came to a close, this number
dropped two points to 19 percent. For the month, more than 34 percent
feel economic conditions are the same or getting better, virtually
unchanged from September.
"Since the Monitor's inception, consumers have consistently been
more confident in their personal finances than the economy and they
continue to show a resiliency in adapting their spending behavior in
light of economic changes," said Georgiadis. "Consumers are in
uncharted territory as gas prices usually go down during the holidays.
But so far, the unexpected expense doesn't appear to be breaking that
About the Discover US Spending Monitor
The Discover US Spending Monitor released monthly, queried nearly
15,000 adult consumers in August 2007 about spending intentions and
capacity. The survey also asked for opinions on the U.S. economy and
ratings of personal finances. The survey was conducted by Rasmussen
Reports, LLC, an independent survey research firm
(www.rasmussenreports.com). It has a margin of error of +/- 1 percent.
About Discover Financial Services
Discover Financial Services (NYSE: DFS) operates the Discover Card
with more than 50 million cardmembers, the Discover Network with
millions of merchant and cash access locations, and the Goldfish
credit card business in the United Kingdom. Discover Financial
Services also operates the PULSE ATM/debit network, which serves more
than 4,400 financial institutions and includes nearly 260,000 ATMs, as
well as POS terminals, nationwide. For more information, visit
CONTACT: Discover Financial Services
SOURCE: Discover Financial Services