Nearly half of consumers expect to spend less on discretionary
purchases in February; confidence in the economy continues to decline
RIVERWOODS, Ill.--(BUSINESS WIRE)--Feb. 7, 2008--The Discover U.S.
Spending Monitor recorded its third consecutive monthly decline in
January, falling more than four points to 86.1 as economic concern
continued to grow and post holiday spending intentions moderated. Both
the economic and spending components of the index reached new lows in
January as just over 70 percent of consumers now think the economy is
in decline and 48 percent feel the same way about their personal
finances. With optimism decreasing, consumers who participated in the
January Monitor survey struck a decidedly cautious note when it came
to spending intentions.
Expected household expenses remain high: Consumers steady their
spending as nearly half intend to cut back on discretionary purchases
The number of people preparing to spend more next month fell to 30
percent, down a point from December and five points from October.
However, there was an 8 point increase - from 43 to 51 percent - in
the number who say they expect to spend the same in February. The
shift seems to reflect a caution among consumers to hold the line on
At the same time, consumers seem to be ratcheting down plans for
spending in areas beyond necessities. Nearly half (49 percent) of the
January sample said they expect to do less discretionary spending in
February. That's nearly 5 points higher than December and a full 10
points more than what consumers said last September. Discretionary
spending was not the only area consumers were expecting to cut back.
They also intend to spend less on household improvements, major
personal purchases and savings.
The shift in spending comes as 46 percent are wrestling with the
prospect of higher household expenses like gas, groceries and mortgage
payments. This is down a point from December, but still 11 points
higher than the 35 percent reported in September.
"Expected household expense pressures remain high with consumers
seeing little relief at the gas pump or grocery store," said Margo
Georgiadis, executive vice president and chief marketing officer for
Discover Financial Services. "Over the last four months, we have seen
a steady increase in the number of consumers who are not only
moderating their spending, but intending to spend less to compensate
for household expense pressures."
For the first time, consumers making $75,000 or more showed a
significant change in spending intentions. In December, for example,
14 percent of people making more than $75,000 a year said they
intended to spend more on discretionary items like entertainment and
travel. In January, that number dropped to just nine percent.
The most pronounced change, however, came in spending expectations
for next month. Nearly 60 percent of this income group said they would
hold February spending on par with January. Last month that same
sentiment was expressed by just under 45 percent.
Less than 50 percent continue to have money left over after paying
Despite the cutback in discretionary expenses to compensate for
higher household costs, more consumers are feeling a strain on their
budgets. Nearly 40 percent, a new Monitor high, say they will spend to
their limit in January, with nothing left over after paying their
monthly bills. This is also the second consecutive month in which
those who did have money left over fell under 50 percent. On the other
hand, of those who say they will have money left over, 17 percent say
they have more money left over this month than last, a Monitor record,
and another 60 percent say they have the same as last month. There was
also a drop in those expecting income shortfalls or added expenses
from 40 percent to 38 percent.
"While less than half of consumers are expecting to have money
left over, those who do have money left over are expecting more than
the previous month," said Georgiadis. "But with growing concerns over
the economy and personal finances, the numbers show these consumers
may be more intent to save their money right now rather than spend it,
giving little boost to a slowing economy."
Concerns over the economy, personal finances grow; consumers
making $75,000 show increasing signs of concern
The major culprit in the decline of the Monitor for January is
waning confidence in the U.S. economy. The aggressive responses by the
Federal Reserve and a planned stimulus package introduced by Congress
and the White House last week had no immediate affect on consumer
pessimism. Last week's Monitor numbers remained flat despite the Fed
and legislative announcements intended to help stimulate the economy.
The decline in attitudes occurred across every demographic: age,
gender, income, marital and family status. The economic component of
the Monitor, as a result, fell by nearly 8 points to a level that is
18 points lower than in October.
In January, 48 percent of consumers said that their personal
finances were deteriorating, up from 45 percent the month earlier. The
change coincided with a significant shift in ratings for the economy
as over 41 percent of consumers described the state of U.S. economy as
poor compared to only 35 percent who felt that way in December.
Interestingly though, the number of consumers who rated their personal
finances as good or excellent remained at 39 percent for the month.
The most dramatic shift in attitudes in January occurred among
consumers with annual incomes of $75,000 or more. Their economic
confidence sharply declined in January. Twenty-nine percent rated the
economy as poor and only 8 percent rated it excellent. The January
figures compare to 20 percent and 12 percent respectively for
Notable, perhaps, is the 8-point drop in confidence these high
income consumers had towards their personal finances. Less than 43
percent felt their finances were getting better compared to over half
last month. Those who felt their finances were getting worse rose 5
points to 31 percent.
"When there is the potential for slower growth in the economy,"
Georgiadis said, "higher income groups are often slower to react, but
there is no question now that all income groups are genuinely
concerned about the economy and are becoming more guarded with their
For more Discover U.S. Spending Monitor survey data and
information, please visit
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. Since its inception in
1986, the company has become one of the largest card issuers in the
United States. 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 www.discoverfinancial.com.
CONTACT: Discover Financial Services
SOURCE: Discover Financial Services