Consumers Show Slight Increase in Economic Confidence, but Spending Intentions Remain Guarded
RIVERWOODS, Ill.--(BUSINESS WIRE)--
The Discover U.S. Spending Monitor rose 1.2 points in January, mainly
due to a slight increase in economic confidence from consumers. The rise
in optimism was largely offset by continued restraint on spending
intentions, as consumers, buffeted by dismal housing, labor and
financial news continue to keep a tight hold on their purse strings. As
a result, the monthly index stood at 77.8 (base = 100), slightly better
than the record low 76.6 set in December.
The January Monitor survey reflected both the uncertainty and the
steadfastness of consumers in the face of the worst financial news in
more than three decades.
Majority of Consumers Still Intending to Cut Discretionary Spending
The outlook on spending cast a long shadow. For only the second time in
the Monitor’s two-year history, the percentage of Americans who plan to
spend less in the following month, 29 percent, is greater than the
percentage that plan to spend more, 17 percent. In contrast, these
measures were almost the reverse in August 2008, the month before the
financial crisis really took hold. Back then, 15 percent said they would
spend less and 32 percent said they intended to spend more.
No spending category was immune from intended consumer cutbacks. A
near-record 55 percent of Americans were prepared to spend less on
discretionary categories like entertainment, dining out and movies next
month. A majority of people (52 percent) are cutting back on household
improvements and major personal purchases (51 percent) with both
measures near their record highs. Finally, consumers are putting a sharp
pencil to household expenses where a record high 70 percent are either
holding the line or spending less, and a record low 28 percent say they
will have to spend more on household expenses in the coming month.
“The last time the Monitor reported 55 percent of consumers intending to
spend less on discretionary spending, gas prices were nearing $4 per
gallon,” said Julie Loeger, senior vice president of marketing for
Discover Financial Services. “Job losses and a poor economy have
definitely replaced high gas prices as primary drivers of discretionary
Less Than a Majority Have Money Left Over After Paying Bills
Since September, the Monitor has shown a slow but noticeable reduction
in the number of Americans who have money left over after paying the
monthly bills, from 52 percent to 49 percent today. This is the first
time since February 2008 that less than a majority (49 percent) of
consumers have money left over after paying the monthly bills.
Despite the fact that fewer have money left over, there was some
positive news: Of those who did have money left over, 78 percent had the
same or more left over than the previous month. This was a 6-point jump
from December. It is also the first time since October that less than 40
percent (37 percent) of consumers were expecting an added expense or an
income shortfall in the month ahead.
Consumers Show Slight Improvement in Economic, Financial Outlook
Perhaps buoyed by the inauguration of the nation’s 44th president and
pledges of an added economic stimulus from the new administration,
consumers were slightly less pessimistic in their outlook for the
economy. While virtually the same number of consumers rated the economy
as poor (64 percent versus 65 percent in December), there was a 4-point
drop from 71 percent to 67 percent in the number of consumers who think
the economy is getting worse.
Twenty-three percent of consumers still rate their finances as poor, the
same as last month, but there was a 2-point decline in the percentage of
consumers who feel their finances are getting worse (52 percent in
January versus 54 percent in December). The improvement came even though
surveys in the last week of the month began to show sagging confidence.
“These are highly uncertain times for consumers,” said Loeger.
“Consumers are trying to get their budgets under control, and trimming
their expenses. While these moves are helping individual consumers
combat the effects of the recession, they are unfortunately having an
adverse effect on the economy.”
Monitor Rises with Obama Inauguration, Falls on Job Loss Reports
In the weeks leading up to the presidential inauguration, consumers
reported a spurt in economic confidence, no doubt in anticipation of the
change in administration and a new approach to the nation’s financial
crisis. Had January ended on Inauguration Day, the Monitor’s Index would
have been up more than 3 points. Even the swearing in of the nation’s
first African-American president and the near certainty that Congress
would enact a new stimulus plan could not stave off the burst of
pessimism in the week following the inauguration.
For the seven days ending Jan. 28, the Monitor dipped more than 3
points. Fueling the decline was a 4-point drop in economic confidence
and a 3-point plunge in the index measuring consumer spending
intentions. The fall coincided with a barrage of post-inauguration news
about job cuts.
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® 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