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Discover(R) U.S. Spending Monitor(SM) Flat in February

Consumer spending plans continue to be cautious, as concern over the economy and personal finances remain high

RIVERWOODS, Ill.--(BUSINESS WIRE)--March 5, 2008--The Discover U.S. Spending Monitor steadied in February as spending intentions flattened, while pessimism about the economy increased. After sharp spending cutbacks in December and then January, following the end of the holiday season, consumers steadied their spending, but were cautious about any increases. Even lower expected pressures on household expenses and the announced economic stimulus package did not encourage a rebound. Record pessimism about the economy and personal finances seems to be constraining consumers' willingness to spend more. The Monitor was essentially unchanged in February, up just .3 to 86.4.

Household expense pressures ease, but consumers continue to hold the line on spending

Spending intentions virtually mirrored January's numbers and continued to reflect a caution among consumers to hold the line on spending. While there was a 2-point decrease in the number of consumers who said they were spending less than last month, this did not translate into an expected increase in spending in the month ahead. This number remained at 29 percent.

The hesitancy among consumers persisted even as those expecting to spend more on household expenses dropped six points to 40 percent, a number not seen since last October. Consumers still appear to be spending with caution when it comes to discretionary expenses. There was no significant increase in those willing to spend more and over 43 percent still plan to spend less in each of the categories surveyed: discretionary personal expenses like eating out or going to the movies, household improvements like remodeling or decorating, and major personal purchases like a health club membership or vacation.

"Consumers continue to approach their spending with caution," said Margo Georgiadis, executive vice-president and chief marketing officer for Discover Financial Services. "The drop in household expense expectations has done little to change consumer minds when it comes to discretionary spending. Given recent economic news of record oil prices and a 26-year high in food and energy prices, there seems to be no relief in sight for any increase in consumer spending beyond the essentials."

Cautious spending continues even among high-income earners. As reported in January, consumers making $75,000 or more continue to show a change in their spending intentions, as a Monitor low 30 percent plan to spend more this month. This appears largely driven by an 8-point drop of those expecting to spend more on household expenses. But it did not correlate with higher discretionary spending intentions, as those expecting to spend more on personal entertainment and major personal purchases dropped by a point each hitting new lows for the $75,000+ income group.

Budgets Remain Tight: Less than a majority have money left over after paying monthly bills

Cutting back discretionary spending did not appear to help consumers' budgets in February, as only 48 percent said they would have money left over after paying the monthly bills. This is the third consecutive month this number has fallen below 50 percent and may correlate with continued household expense pressures.

But of those who said they would have money left over, 79 percent said it would be the same or more as last month. And despite continued concerns over their personal finances, only 37 percent of consumers said that they expected shortfalls in income or added expenses in the month ahead. That's nearly two points better than January.

Consumers remain very concerned about the economy and their finances

Less than 19 percent of consumers rate the economy as good or excellent these days, a new Monitor low and a sharp drop from 32.5 percent in October. Outlook ahead also hit a new low with 70 percent expecting economic conditions to worsen.

The economic stimulus package announced in February led to a brief increase in the Monitor's index, but was only temporary as the Index moved lower towards the end of the month.

Those making $75,000 or more do not appear hopeful for an economic turnaround either, with those seeing it as good or excellent dropping again (27 percent) and those feeling the economy is getting better dipping from 17 to 14 percent. This is in sharp contrast to the 32 percent of upper income earners who felt the economy was getting better last July.

Women also continue to be much more pessimistic about the economy. Only eight percent of women think the economy is getting better compared to nearly 14 percent of men; and 75 percent of women say the U.S. economy is getting worse while 65 percent of men share that opinion.

Tight budgets and a negative view on the economy also continue to dampen consumer views of their personal finances. A Monitor high 48.5 percent view their personal finances as getting worse ahead. Upper income consumers strayed from their counterparts, as 40 percent felt their personal finances were getting better, down over two points from January. All other incomes below $75,000 nudged up a point.

"Consumers are concerned about their finances and even more concerned about the economy," said Georgiadis. "They may need a steady stream of good economic news to alleviate the caution they've displayed towards their spending."

For more Discover U.S. Spending Monitor survey data and information, please visit www.discoverfinancial.com/surveys/spending.shtml.

About the Discover U.S. Spending Monitor

The Discover U.S. Spending Monitor released monthly, queried nearly 15,000 adult consumers in February 2008 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. 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
Matthew Towson
224-405-5649

SOURCE: Discover Financial Services