Increasing Concern Over the Economy, Personal Finances Contributes
To New Monitor Low; Rising Household Expense Expectations Cuts Into
Savings, Discretionary Spending
RIVERWOODS, Ill.--(BUSINESS WIRE)--April 2, 2008--The Discover
U.S. Spending Monitor reached a new low in March as consumers grew
even more concerned about the economy and their personal finances in
the face of rising monthly expenses. The March Monitor fell to 85.1,
down more than a full point from the previous month and lower by 11
points than just six months ago.
The Monitor steadily drifted downward during the middle of March
as reports of financial troubles with Bear Stearns, record high oil
prices and an emergency rate cut by the Federal Reserve gave consumers
little optimism about the economy. Survey results also showed that
consumers sharply underestimated their spending intentions for March.
In February, 29 percent said they expected to spend more in March.
When asked about their actual March spending, however, 46 percent
reported they were spending more. The 17-point increase appears driven
by sharp increases in household expenses such as gasoline, food and
mortgages. In turn, consumers plan to actively cut back their
discretionary spending and even savings to help make ends meet.
Expected Rise in Household Expenses Likely To Cut Into Savings,
Indeed, with rising costs, particularly associated with energy and
food prices, consumers are anticipating higher household expenses. In
March, there was a 12-point increase - from 40 percent to 52 percent -
in the number of consumers who expect to spend more next month on
household basics. To help balance their budgets, consumers are
planning to actively spend less across all discretionary spending
areas and to trim back savings. Just under half of consumers are
cutting back on discretionary expenses like dining out, going to the
movies or sporting events, and nearly 46 percent plan on spending less
on home improvements or major personal purchases like vacations. Both
of these numbers are Monitor highs. Over 39 percent said they would
save or invest less next month, up from 36 percent last month.
"With no relief in sight at the pump or grocery store, consumers
are actively cutting back on discretionary expenses to help keep
budgets in balance," said Margo Georgiadis, executive vice president
and chief marketing officer of Discover Financial Services. "Beyond
sacrificing a family vacation or night out on the town, many consumers
also are cutting back on savings to offset higher household expenses."
All demographics and income levels are being affected by the
prospect of higher household expenses, even consumers making $75,000
or more. Nearly half (49 percent) of this segment said they expect to
spend more on necessities next month. That's up 19 points from survey
results in February and is the largest increase since November when
oil prices unexpectedly rose entering the holiday season.
And just like everyone else, upper-income consumers are cutting
discretionary expenses and savings to offset higher household
expenses. This month, there was a 3.5-point increase to nearly 24
percent, a Monitor high, who claim they will save and invest less.
There was a 4-point increase to 42 percent, also a Monitor high, among
upper-income respondents who said they will spend less next month on
Nearly 50 Percent Have Money Left Over After Paying Monthly Bills,
but Budgets Are Tight
The cutback in discretionary spending and savings did lead to one
of the few glimmers of light in this month's survey. For the first
time since September the survey found an increase in the number of
consumers claiming to have money left over after paying their monthly
bills (up 1.5 points to 49.7 percent).
On a less upbeat note, however, those with the same or more money
left over versus the previous month hit a monitor low at just under 74
percent, down from over 79 percent in February. Nearly 26 percent had
less money left over than the previous month, up from just over 20
percent in February. Upper-income consumers (those making $75,000 or
more) had the sharpest increase in those with less money left over,
rising to 22.7 percent versus 14.2 percent in February. This over
8-point increase was double the increase experienced by other income
In addition, there was a 3-point increase to 40 percent in the
number of consumers who anticipate added expenses or income shortfalls
in the next month, reversing a three month decline. Upper-income
consumers had the highest increase here as well increasing 6 points to
nearly 31 percent.
"Consumers are proactively making changes in their spending to
ensure that they have money left over at the end of the month," said
Georgiadis. "Regardless of income level, consumers are cutting back on
discretionary spending and savings to keep their budgets in balance
and to prepare for continued expense pressures ahead."
Views on the Economy, Personal Finances Continue To Decline
Views on the economy continued to worsen in March, as nearly 50
percent rated the economy as poor, a Monitor high. Consumers are not
optimistic about an upturn in the economy either, as 73 percent, also
a Monitor high, feel that economic conditions are getting worse. These
negative trends continued to new highs across all ages and income
Dismal views on the economy carried over to declining views on
personal finances. Nearly 60 percent of the nation's adults view their
personal finances as fair or poor today. Looking ahead, half (50
percent) of consumers, a new Monitor high, believe that their personal
finances are getting worse. Only 23 percent, a new low, believe that
things are getting better. All income groups are concerned about their
personal finances. Middle- and upper-income consumers hit new highs in
those seeing their personal finances as worse ahead. Those earning
$40,000 to $75,000 increased 2.3 points to 47 percent, while those
earning over $75,000 increased 5.6 points to 37 percent.
"Consumers are extremely concerned about the economy and how they
are going to continue to manage rising expense pressures," said
Georgiadis. "Even upper-income groups are hitting new highs in their
concerns about the economy and personal finances. This does not bode
well for a struggling economy that needs a good dose of consumer
spending to help fuel a rebound."
For more Discover U.S. Spending Monitor survey data and
information, please visit
About the Discover U.S. Spending Monitor
The Discover U.S. Spending Monitor released monthly, queried
14,000 adult consumers in March 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. For more
information, visit www.discoverfinancial.com.
CONTACT: Discover Financial Services
SOURCE: Discover Financial Services