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Holiday Spending Steady Despite Increased Number of Consumers Expecting to Spend More on Household Expenses

Discover(R) U.S. Spending Monitor(SM) falls more than three points in November as consumer confidence in personal finances and the economy declines

RIVERWOODS, Ill.--(BUSINESS WIRE)--Dec. 5, 2007--Household expenses and holiday shopping have consumers preparing to spend more in December even as economic confidence has dropped to its lowest level in more than six months. Despite anticipated increases in seasonal spending, declining consumer confidence in the economy and personal finances drove a 3.4-point decline in the Discover U.S. Spending Monitor for November. Survey responses from 14,000 randomly sampled consumers (500 each night from November 1-28) put the Monitor at 93.4 compared to 96.5 in October.

Consumers Maintain Holiday Spending Even As Spending Expectations on Household Expenses Rises

Overall, most consumers (51 percent) said they expect to spend more money in December, hardly a surprise given the time of year. This is compared to 35 percent who said they would spend more in November and an average of 33 percent making similar claims about month-to-month spending for the previous five months.

But rising expectations to spend more on gas, groceries and mortgage costs also is a key driver of increased spending among consumers. There was a striking 15-point increase - from 43 percent to 58 percent - in the number of consumers who said they expected to spend more on household expenses in December than they did in November.

To meet the increased household expense obligations in December, more consumers said they were expecting to spend less in December in virtually every other spending category tracked by the Monitor. For example, 45 percent of consumers expected to spend less on discretionary items like entertainment and electronics, an increase of nearly four points from last month's survey, while 38 percent expected to spend less on savings and investment, up from 34 percent last month.

"The remarkable turn we saw last month in spending intentions continued into November as gas and grocery prices remained high," said Margo Georgiadis, executive vice president and chief marketing officer of Discover Financial Services. "Consumers are doing their best to adapt to the economic environment, spending more on the things they need while cutting back on discretionary purchases and savings. It will be interesting to see if unexpectedly high household expenses temper holiday spending."

Indicators in the Monitor have so far shown steady holiday spending despite the increase in the number of consumers expecting to spend more on household expenses. Consumers had different opinions about their spending pre- and post-Thanksgiving. In the weeks leading up to the biggest shopping weekend of the year, as many as 55 percent of consumers said they would spend less this year than last, while 43 percent said they would spend the same or more. The week after Thanksgiving the number who said they would spend less on holiday gifts this year slipped to 50 percent, while the number saying they would spend the same or more jumped to 47 percent. Half of the country's holiday gift-givers report they have at least started their shopping, but only 13 percent say they are finished or just about done.

Georgiadis noted that 18- to 39-year-olds were among the most aggressive holiday spenders by a factor of two. At month's end, more than 21 percent said they would spend more for the holidays than last year compared to fewer than 10 percent for people 40 and over.

Majority of Consumers Still Managing Their Budgets to Have Money Left Over, but Budgets are Tightening

Though a majority of consumers (51 percent) say they will have money left over after paying December's bills, they are cutting deeper into their monthly income to meet their obligations. In November, 25 percent of those with money left over said that the amount is less than the previous month, a new high for the Monitor.

A trend may be developing among consumers anticipating an added expense or an income shortfall over the next 30 days. The number steadily increased over the last three months from 35 percent in September to 41 percent in November.

"Consumers are definitely feeling the effects of higher costs," Georgiadis said. "But they continue to manage their finances to account for the changing dynamics of the marketplace, as a majority of them still have money left over at the end of the month and three-quarters of them have the same or more money left over than the month before."

Consumers Grow More Concerned About the Economy, Personal Finances

November marked a reversal for consumers as attitudes about the economy and personal finances appeared to mirror each other. In previous months, consumers remained consistently confident about their personal finances in the face of growing economic concern.

Since Monitor surveying began in May of this year, the number of consumers rating the economy as good or excellent fell to 28 percent, a decline of nearly five points from last month. At the same time, consumers giving the U.S. economy a poor rating rose to nearly 35 percent, an increase of nearly six points from the previous month.

Only 27 percent of consumers said that their finances were getting better these days, a full four points lower than the previous month and a new low for the Monitor. Conversely, a record 46 percent said they felt their finances were getting worse.

"Consumers are growing increasingly concerned about the state of the economy and their own finances," Georgiadis said. "Our survey results suggest a possible crack in their resiliency to successfully adapt their spending behavior and manage their budgets. Nearly half feel their finances are getting worse and over 40 percent are concerned about a shortfall of income. The crack may be temporary since holiday spending will end this month. But for now, consumers appear to be finding less wiggle room in their budgets."

About the Discover U.S. Spending Monitor

The Discover U.S. Spending Monitor released monthly, queried 14,000 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) is a leading credit card issuer and electronic payment services company with one of the most recognized brands in U.S. financial services. The company operates the Discover Card, America's cash rewards pioneer, with more than 50 million cardmembers. Since its inception in 1986, the company has become one of the largest card issuers in the U.S. Its Third-Party Payments business consists of the Discover Network, with millions of merchant and cash access locations, and PULSE, one of the nation's leading ATM/debit networks. Discover also operates the Goldfish credit card business in the United Kingdom. For more information, visit www.discoverfinancial.com.

CONTACT: Discover Financial Services
Matthew Towson
224-405-5649

SOURCE: Discover Financial Services