High Gas and Food Prices Continue To Hurt Discretionary Spending,
Dampen Views About The Economy
Survey: Nearly 62 Percent of Consumers Are Altering Vacation Plans
in the Wake of High Gas Prices, 15 Percent Cutting Vacations First to
RIVERWOODS, Ill.--(BUSINESS WIRE)--July 9, 2008--The Discover U.S.
Spending Monitor fell nearly a point in June to 85.9, as consumers
struggled with rising prices for essentials and continued to lose
confidence in the nation's economy. Economic confidence hit a new
Monitor low, falling in June to a level that is nearly 30 points lower
than a year ago.
June is the sixth month in a row that consumer attitudes about the
economy have trended downward while spending intentions have risen
with living expenses rising beyond their control. The circumstances
have created a balancing act for consumers who are spending less for
discretionary items to compensate for higher costs for necessities. So
far, consumers have been resilient. But there are signs the strain is
beginning to show as more consumers are showing less wiggle room in
Consumers Cutting All Discretionary Spending Areas as They Prepare
to Spend More on Essentials
In a month when gasoline prices rose to new highs and food prices
continued to surge, a majority of Americans (55 percent) spent more in
June than May and almost half (47 percent) prepared for higher
expenses in July.
Since January, there has been a 50 percent increase in the number
of people who expect to spend more next month - from 30 percent to 46
percent - and a surge of 20 points - from 46 percent to 66 percent in
consumers who say they anticipate higher spending on everyday
household expenses like gas and groceries.
Reduced discretionary spending has been the predominant response
for consumers looking to cope with the upward pressure on monthly
expenses. In fact, 56 percent report that they intend to spend less
next month on discretionary personal expenses like dining out, or
going to the movies, up seven points from just six months ago.
But consumers also are taking additional measures to cope with
high gas prices. A strong majority (62 percent) are altering their
vacation plans this summer. An interesting fact is that 55 percent now
say that they are cutting back on everyday living expenses to offset
higher gas prices. And while 41 percent of consumers said their first
line of defense against high gas prices is to cut back on
entertainment spending, 16 percent said they looked to reduce gas and
food expenses and 15 percent said they cancelled vacation plans.
"In the last six months, we've watched consumer optimism about the
economy decline sharply and at the same time, witnessed a forced rise
in spending intentions spurred by high energy and food prices," said
Margo Georgiadis, executive vice president and chief marketing officer
for Discover Financial Services. "Consumers are working hard to make
ends meet, with some even cutting back on groceries or sacrificing a
vacation to compensate."
High pump prices for gasoline, which averaged $4.15 a gallon
nationwide at the end of June, are especially hitting the lifestyles
of lower-income Americans. In fact, 70 percent of the under-$40,000
annual income group reported that gas prices have caused them to cut
living expenses. Only 38 percent of the people in the over-$75,000
segment have resorted to such cuts.
Overall, savings and investments was the only area to see a slight
increase in the number of consumers expecting to save more.
Majority of Consumers Still Have Money Left Over After Paying
Since the first of the year, there has been a modest but steady
increase - from 48 percent to 51 percent - in the number of people who
say they have money left over after paying their monthly bills. But of
those who do have money left over, 32 percent now say that the amount
they have left is less than the previous month, a Monitor high and 11
points higher than just six months ago.
The rise in the number of consumers having less money left over
coincides with an increased amount of consumers expecting an added
expense or shortfall of income over the next 30 days. For the fourth
straight month this number has risen, reaching a Monitor high of 44
percent in June.
Among people who make less than $40,000 a year, there was some
positive news. Nearly 34 percent said they would have money left over
after paying monthly bills. This is the highest this number has been
Consumers Show Little Change in Attitude Toward Personal Finances;
Economic Confidence at Record Low
Consumers showed little change from previous months toward their
personal finances, as nearly 60 percent continue to rate their
finances as fair or poor. This number has consistently held near 60
percent over the last six months. However, 54 percent feel their
personal finances are getting worse, the same as last month and a
Declining optimism among consumers towards their personal finances
has coincided with deteriorating views over the economy. This month's
Monitor saw its economic confidence component slide to a record low.
Only 15 percent of the country rates the economy as good or excellent
- a record low - and 54 percent give the U.S. economy a poor rating -
a record high. The comparable numbers for January 2008 were 21 percent
and 42 percent respectively.
"Consumers are continuing to feel pressure to spend more on
necessities," said Georgiadis. "Despite a majority continuing to have
some money left over after paying monthly bills, rising gas and food
prices has shaken their confidence in the economy and given them
little reason to believe their finances will improve."
For more Discover U.S. Spending Monitor survey data and
information, please visit
About 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 U.S. 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; PULSE,
one of the nation's leading ATM/debit networks; and Diners Club
International, a global payments network with acceptance in 185
countries and territories. For more information, visit
CONTACT: Discover Financial Services
SOURCE: Discover Financial Services