Budgets tighten for consumers; expected decline in post-holiday
spending, concerns about personal finances and the economy lead to 2.6
point drop in the Monitor
RIVERWOODS, Ill.--(BUSINESS WIRE)--Jan. 9, 2008--With the passing
of the holiday shopping season, consumers are expecting to scale back
their spending in January, as ratings of the economy and their
personal finances worsened. The decline in spending intentions, which
returned to levels reported before the holiday shopping season began,
helped drive a 2.6 point drop in the Discover U.S. Spending Monitor
for December. Adding to the decline was an expected budget hangover
from the holidays, as fewer than half of the nation's consumers had
money left over in December, the lowest level since last June. Survey
responses from 12,500 randomly sampled consumers (500 each night from
Dec. 1-31 except for the Christmas and New Year's holiday periods) put
the Monitor at 90.5 compared to 93.1 in November.
Consumer Spending Intentions Decline After the Holidays; Household
Expense Expectations Also Fall
Just over 31 percent of consumers are expecting to spend more in
January, a 20-point drop from what consumers expected to spend in
December, but consistent with average numbers reported in the months
preceding the holiday shopping season. The number of consumers
expecting to spend less in January jumped to 24 percent, compared to
just 11 percent in December.
Expectations to spend more on gas, groceries and mortgage costs in
January also fell to 49 percent, but remains 10 points higher than the
average reported in the summer and fall. In fact, four out of the five
spending category questions tracked by the Monitor - including
discretionary personal expenses, household improvement expenses, and
major personal expenses - showed a decline in the number of consumers
who expect to spend more in January. Saving and investing was the only
category in which consumers expected to contribute more.
"Not surprisingly, consumers are modifying their spending habits
after the holidays," said Margo Georgiadis, executive vice president
and chief marketing officer for Discover Financial Services. "Expected
household expense pressures remain high with nearly 50 percent of
consumers expecting to spend more in this category. To compensate,
consumers seem to be holding the line on discretionary spending while
saving more. With oil prices reaching $100 a barrel and pump prices
escalating, these trends are likely to continue."
During the months of November and December, the Monitor also
measured holiday spending intentions. Overall, 52 percent of consumers
said they expected to spend less on holiday gifts than they did last
year, while only 19 percent expected to spend more.
Younger adults, ages 18-39, were more aggressive with their
holiday spending, as nearly 25 percent said they expected to spend
more on gifts than they did last year compared to just 14 percent of
those ages 40-64 and 12 percent of those 65 and older.
A Monitor High: 39 Percent Have No Money Left Over After Paying
Consumers faced tighter budgets in December and had to dive deeper
into their incomes to meet their monthly expenses. For the first time
since June, less than a majority (49 percent) expected to have money
left over after paying their monthly bills. Furthermore, December
marked the fourth consecutive increase in the number of consumers
expecting to have no money left over after paying monthly bills,
topping out at more than 39 percent. Of those who had money left over,
27 percent had less left over than the previous month, a Monitor high,
and a number that has also increased four months in a row.
"Until December, most consumers were managing their finances to
account for the changing dynamics of the marketplace," said
Georgiadis. "But continued higher household expenses along with
holiday shopping expenses may have stretched consumer budgets thin in
December. It is not surprising to see the majority of consumers
spending less on holiday shopping this year."
Consumers Concerned About the Economy and Their Personal Finances,
But More See Better Days Ahead
Only 27 percent of consumers rate current economic conditions as
good or excellent, a new low for the Monitor. At the same time,
consumers rating the economy as poor rose to 36 percent, a new high.
Singles and families with children showed more concern about the
economy than those married and with no children. Nearly 40 percent of
unmarried people rated the economy as poor while just over a third of
married people felt the same way. Just 32 percent of those married
without children rated the economy as poor while nearly 40 percent of
people with children gave poor ratings to the economy.
After hitting a low in November, more consumers saw brighter days
ahead for the economy in December. Overall, nearly 30 percent felt
economic conditions were the same or getting better, compared to 28
percent in November. Sixty-six percent felt economic conditions were
getting worse, a 1-point decline from November.
Continued concern over the economy correlated with a drop in
confidence consumers felt about their personal finances. Twenty-two
percent, the highest since Monitor polling began, rated their finances
as poor. But slightly more consumers in December saw better days ahead
with nearly 28 percent saying their personal finances were getting
better, up a point from November, and 46 percent saying their personal
finances were getting worse, down a point from November. Overall, a
majority (52 percent) of consumers expected their finances to be the
same or better in the month ahead.
"Month-to-month, consumers have shown more confidence in their
personal finances than they have in the economy," said Georgiadis.
"But they remain unsure where their personal finances are heading. For
the second month in a row, less than 30 percent of consumers felt
their personal finances were getting better."
About the Discover U.S. Spending Monitor
The Discover(R) U.S. Spending Monitor(SM) is a monthly index of
consumer spending intentions and capacity that is based on interviews
with a random sample of 15,000 US adults conducted at a rate of 500
per night. In addition to spending, the survey asks consumers their
opinions on the U.S. economy and on their personal finances. Weekly
reports reflect calculations for the seven previous days of
interviews, or a sample of 3,500 adults. Surveys are conducted by
Rasmussen Reports, an independent survey research firm
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 payments
businesses consist 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
CONTACT: Discover Financial Services
SOURCE: Discover Financial Services