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Discover(R) U.S. Spending Monitor(SM) Posts 6-Point Drop to 80.4

Record Low Economic Sentiment Weighs on Consumer Spending Intentions, Upper-Income Consumers Show Significant Shift in Spending Behavior<

POLL: 66 Percent of Consumers Planning to Spend Less This Holiday Season Due to the Financial Market Crisis

RIVERWOODS, Ill.--(BUSINESS WIRE)--Nov. 6, 2008--The Discover U.S. Spending Monitor fell a record six points in October to 80.4 (based off of 100), as consumers' economic confidence reached record lows and views of their personal finances deteriorated.

News of the nation's troubled financial system and increased pessimism over the economy finally began to weigh on consumers' views over their current finances, which had remained steady during the year. Equally troubling, the steep drop in economic and financial confidence may have consumers pulling back on current and future spending plans approaching the holidays, even as gas prices continue to fall.

Record Number of Consumers Concerned about the Economy, Personal Finances

Nearly two out of three consumers (63 percent) now rate the economy as poor and 72 percent think things are getting worse. A year ago, only 19 percent gave the economy a poor rating and only 52 percent thought it was getting worse.

Consumer attitudes about their own finances are finally succumbing to the news as well. For the first time since the Monitor's inception, 60 percent of consumers rate their finances as fair or poor. Nearly 56 percent of consumers also said their finances were getting worse. This record-high reading is up 4 points from September and more than 15 points from a year ago.

However, the numbers from October's Monitor weren't all bad. For the second month in a row less than 40 percent are expecting an income shortfall or an added expense in the next 30 days. This is the lowest this number has been since February and the fourth straight month this number has declined.

A majority of consumers also continue to have money left over after paying their monthly bills. This is the seventh consecutive month the number has been over 50 percent. Of those who had money left over, 79 percent have the same or more money left over than the previous month.

One reason for the surplus may be consumers' desire to cut back on discretionary spending to make ends meet. Consumers seem content with holding onto their extra money rather than spending it, an obstacle to a consumer-led economic recovery.

"October's numbers show consumers clearly are hunkering down to ride out the economic and financial crisis," said Margo Georgiadis, executive vice president and chief marketing officer of Discover Financial Services. "All the negative news about bank rescues, job reductions, mortgage foreclosures and stock market volatility are giving consumers no reason to abandon the caution they've employed in terms of their spending."

Consumer Spending Intentions Drop To New Lows

The Monitor's results showed that spending plans remain highly guarded in most households. Sixty-six percent of the country's adults, compared to only 54 percent a year ago, said that their October spending is the same or less than it was in September. Similarly, 71 percent - versus 46 percent in October 2007 - claim that next month they plan to spend the same or less. These are both Monitor records.

Even the precipitous drop in gasoline prices couldn't ease the stranglehold consumers have over their current spending plans, as 79 percent said they have not increased their spending in other areas as gas prices have fallen. Of those who have increased their spending, 57 percent have earmarked gas and groceries as the places they have increased spending. Only 14 percent of those who have increased their spending said they are spending on discretionary items such as going out to dinner or the movies, while 9 percent said they would save or invest money gained from lower gasoline costs.

"The economic and financial news has caught up with consumer spending behaviors," Georgiadis said. "Nearly 88 percent of consumers are somewhat or very concerned about the financial market crisis and 90 percent of those concerned are spending less because of it."

The economic news isn't likely to get a lift from the holidays either. Headed into the most important shopping season of the year for retailers, 66 percent of consumers told the Monitor they are planning on spending less this holiday season due to the crisis in the market. Pre-holiday sales, started earlier than ever this year, may be the lone bright spot for retailers, as 30 percent of consumers said they are already taking advantage of the sales.

Even Upper-Income Consumers are Feeling the Pinch

Throughout the spikes in economic sentiment that have occurred since late spring of this year, the most stalwart group of consumers has been consumers making $75,000+. The gap between this group and those making under $40,000, in terms of economic perceptions and spending intentions, has always been in the double digits. Last month, for example, 45 percent of those making $75,000+ were cutting back on their discretionary spending, compared to 56 percent of those making under $40,000.

But October's numbers tell a different story, as upper-income consumers fell more in line with their lower-income counterparts. Fifty-one percent are expecting to spend less on discretionary entertainment purchases, compared to 57 percent of consumers making under $40,000. This is the first time this number has been over 50 percent for upper-income consumers. Forty-nine percent expect to spend less on household improvements, up 5 points from last month and 45 percent are spending less on major personal purchases. Savings and investing was the only category to see an increase in spending from consumers making $75,000+, up 3 points from September.

For the first time, more than 60 percent of consumers in all three income groups polled (under 40k, 40k-75k, over 75k) rated the economy as poor. In September, fewer than half (48 percent) of upper-income consumers gave the economy a poor rating. Also for the first time, more than 70 percent of all three income groups felt the economy was getting worse.

Most notably, upper-income earners are uneasy over their personal finances. In September, only 40 percent of the $75,000+ earners in the country thought their financial situation was getting worse. In October, half (50 percent) felt that way, a record nearly seven points above the previous high set in July when gas prices were surging through the $4.00 per gallon mark.

"Upper-income consumers have become equally pressured by the economic downturn, and are actively adjusting their spending downward," said Georgiadis. "The sharp cutbacks in spending these consumers intend to make approaching the holidays will make the holiday shopping season even more challenging for retailers."

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

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 (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.

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

SOURCE: Discover Financial Services