Majority of Consumers Feel Economic Conditions are Getting Worse; Discretionary Spending Falls as Gas Prices Rise
RIVERWOODS, Ill., Apr 06, 2011 (BUSINESS WIRE) -- Consumer confidence fell for the second straight month in March, as high gas prices correlated with discouraging consumer views about the direction of the U.S. economy, according to the Discover U.S. Spending Monitor.
The Monitor, a poll of 8,200 consumers tracking economic confidence and spending intentions on a daily basis, fell 2.6 points to 89.5, falling below 90 for the first time since December 2010. Fifty-three percent of consumers still rate the economy as poor, practically unchanged from February. Thirty-five percent of consumers rate the economy as fair, while just 10 percent rate the economy as good or excellent.
But 51 percent of Americans feel economic conditions are getting worse, a 7-point jump from February and the highest number the Monitor has reported since September 2010. Twenty percent of respondents feel conditions are the same, while 25 percent of the population feels the economy is improving.
March also showed a decline in consumers' attitudes about their personal finances. Thirty-two percent rate their finances as good or excellent, down 3 points from February. Forty-two percent of consumers rate their finances as fair, and 24 percent say their finances are poor. When asked if their finances were getting better or worse, 48 percent said their finances are worsening, up 3 points from February. Twenty-seven percent of consumers feel their finances are unchanging, and 22 percent say their finances are improving.
Majority of Consumers Spending More on Gas, Groceries; Cutting Discretionary Spending
The Monitor is reporting that consumers are once again showing signs of off-setting high prices at the pump with cuts in discretionary spending. Overall, 33 percent of consumers expect to spend more in the month ahead, an 8-point rise from February. As well, for the first time since July 2008, a majority of consumers, 55 percent, are planning to spend more on gas, groceries and their mortgages. This number jumped 14 points from February. Consumers are offsetting the rising costs of household expenditures by reducing spending in the following areas:
- Entertainment: Fifty-three percent of consumers are expecting to spend less in the next month on going out to dinner, movies or sporting events, up 6 points from last month. Thirty-five percent expect to spend the same, down 5 points from February, while 12 percent plan to spend more, unchanged from last month.
- Home Improvement: Fifty percent of consumers plan to spend less next month on home improvement purchases, up 4 points from February. Thirty percent expect to spend the same, down 6 points from February, while 14 percent plan to spend more, unchanged from last month.
- Travel and Memberships: Forty-eight percent expect to spend less on a vacation or health club membership, up 3 points from last month. Thirty-five percent expect to spend the same, down 5 points from February, while 12 percent plan to spend more, unchanged from last month.
"High gas prices inevitably take a bite out of consumers' budgets," said Julie Loeger, senior vice president of brand and product management for Discover. "Though we know our economy counts on discretionary spending in order to grow, spending less on baseball tickets, new home appliances or a family vacation makes financial sense when consumers are feeling pain at the pump."
42 Percent Expecting an Income Shortfall Over the Next 30 Days
Despite consumers best efforts to balance their budgets in the wake of high gas prices, 42 percent say they are expecting an income shortfall in the next 30 days, 6 points higher than February and the biggest jump in the Monitor's history. The jump comes despite the fact that 48 percent plan to have money left over after they pay their bills for the month, unchanged from February.
However, it has been two years since a majority of consumers reported having money left over. Furthermore, 27 percent of those consumers who do have money left over expected to have less money left over than the month before, a 5-point rise from February.
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® U.S. Spending MonitorSM is a monthly index of consumer spending intentions and capacity that is based on interviews with a random sample of 8,200 U.S. adults conducted at a rate of 275 per night. In addition to spending, the survey asks consumers their opinions on the U.S. economy and their personal finances. The Monitor began in May 2007 with a base index of 100. Surveys are conducted by Rasmussen Reports, an independent survey research firm (www.rasmussenreports.com).
Discover Financial Services (NYSE: DFS) is a direct banking and payment services company with one of the most recognized brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company operates the Discover card, America's cash rewards pioneer, and offers personal and student loans, online savings accounts, certificates of deposit and money market accounts through its Discover Bank subsidiary. Its payment businesses consist of 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 more than 185 countries and territories. For more information, visit www.discoverfinancial.com.
SOURCE: Discover Financial Services