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Discover(R) U.S. Spending MonitorSM up 2.6 Points in August
Record Monthly Increase in the Monitor's Index, as Economic Pessimism Eases and Consumers Adopt a Hold-the-Line Attitude on Spending

RIVERWOODS, Ill., Sep 04, 2008 (BUSINESS WIRE) -- The Discover U.S. Spending Monitor rose 2.6 points in August to 87.8, the largest ever month-over-month increase in the Monitor's index history, and its highest reading of 2008. It is the second month in a row that the monthly index has moved upward, largely as a result of easing pessimism about the economy and a hold-the-line approach to spending. While optimism about the economy is starting to trend upward, the Monitor's Index still lies seven points below the August 2007 reading of 94.8.

The economic component of the Monitor has moved in near lock-step with the retail price of gasoline. In August, gas prices tumbled 37 cents a gallon to levels well below the $4.00-a-gallon average that had been the norm for much of the summer. The price decline correlated with an appreciable improvement in consumer attitudes about the economy as the Monitor's confidence measure surged more than six points over July. It also marked a shift in spending behavior, with consumers expecting to feel less of a pinch in their budgets next month from household expenses.

Consumers Adopt Hold-the-Line Attitude on Spending

There was a 7-point decline in the number of consumers expecting to spend more in the next month from 40 percent to 33 percent. This is the lowest this number has been since February. No doubt falling gas prices contributed to this decline as there was an 11-point drop from 57 percent to 46 percent in the number of consumers expecting to spend more in September on household expenses like gas and groceries.

The relief felt from lower household expenses and rise in economic confidence, however, did not translate into consumers' willingness to expand their budget for more discretionary spending. Instead, consumers indicated they would spend the same in September as they did in August. Thirty-five percent are expecting to spend the same on discretionary and major personal purchases, up nearly two points from July. There was also a 3-point jump in the number of consumers expecting to hold steady on their savings. And 31 percent of consumers are expecting to spend the same as last month on home improvements, up a point from July.

"After months of discretionary cutbacks to compensate for record gas prices, oil's retreat in August may have given consumers a wait-and-see attitude in terms of their spending in the month ahead," said Margo Georgiadis, executive vice president and chief marketing officer of Discover Financial Services. "While their confidence in the economy has improved, the Monitor's numbers are still showing that consumers are acting cautiously when it comes to increasing discretionary spending."

Declining Home and Asset Values Affect Spending

While lower gas prices may be granting some relief to consumers, declining home values and a bear market continue to weigh on consumer spending. Fifty-eight percent of consumers are somewhat to very concerned about the decline in housing values; though fewer this month, 45 percent versus 48 percent in July, say that their concern has led them to reduce overall spending. Fifty percent of consumers who have $5,000 or more in stocks, bonds or mutual funds are also reducing their spending due to concerns their assets are decreasing.

Perhaps reflecting the poor outlook on home sales and the prospects of a near-term payback on their home investments, an increasing number of consumers -- 16 percent this month compared to 13 percent in July -- are now saying they will cut back on home improvements and household expenses rather than ease off on major purchases and savings.

First Drop Since February in the Number of Consumers Having Money Left Over

The wait-and-see spending attitude also arises from how close to the limit Americans think they are with respect to monthly spending. This month, only 51 percent of consumers say they will have money left over after paying their bills, down a little more than a point from last month and the first drop the Monitor has seen since February. However, of those who do have money left over, 65 percent said they would have the same amount of money left over as last month. This is the highest this number has been since last October.

Another positive sign from consumers is for the second month in a row, the number expecting an income shortfall or added expense in the next 30 days dropped, this time to 40 percent, compared to 42 percent in July. This is the lowest this number has been since March.

Views about the Economy Improve, but Concerns Remain Over Personal Finances

The biggest movement in the Monitor came from improving consumer views about the economy. In July, 73 percent said the economy was getting worse. In August, only 65 percent felt that way. The 8-point change was the largest single monthly improvement in the history of the Monitor and the second consecutive month that the outlook brightened.

The rise in economic optimism crossed virtually every gender, age and income demographic. In many instances the swing toward the positive was by a margin of 10 points or more.

When it came to personal finances, consumers' attitudes were improved, but less so than the views they expressed about the economy. Fifty-one percent of consumers are now saying that their personal finances are getting worse compared to more than 55 percent who held that opinion in July. But nearly 59 percent currently rate their financial condition as fair or poor, up a point from July.

"While more consumers may be feeling economic conditions are improving, the effect of high gas and food prices has taken its toll on their personal finances," said Georgiadis. "It appears we have a long way to go before economic optimism turns into greater confidence in personal finances and growth- oriented spending."

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

About Discover U.S. Spending Monitor

The Discover(R) U.S. Spending MonitorSM 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 (www.rasmussenreports.com).

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 www.discoverfinancial.com.

SOURCE: Discover Financial Services

Discover Financial Services
Matthew Towson
224-405-5649
matthewtowson@discover.com