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
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
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