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
